Major mergers put region in spotlight

Beef and beer.

Northern Colorado is in the crosshairs of two major proposed mergers that could have a dramatic impact on the region’s economy.

JBS Swift, which has its American headquarters and a beef-and-lamb processing facility in Greeley, is facing strong opposition from the U.S. cattle industry to its proposed acquisition of National Beef Packing Co., Smithfield Beef Group and Loveland-based Five Rivers Ranch Cattle Feeding. Likewise, the proposed acquisition of brewing giant Anheuser-Busch by Belgium brewing company InBev awaits approval from federal regulators.

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More than 70 cattle-producing groups across the nation have expressed their opposition to the acquisitions, saying they would create a beef industry that would reduce prices paid to producers and raise prices for consumers at the grocery store.

“We oppose it primarily, because of the concentrated structure our industry is already in, it would lead to a reduction of competition in the marketplace by reducing the number of major competitors from five to three and increase their market power to the detriment of farmers and ranchers,´ said Bill Bullard, CEO of Billings, Mont.-based R-CALF USA United Stockgrowers of America, which represents about 12,000 producers nationwide.

Bullard claims that allowing Brazil-based JBS Swift to buy Five Rivers – which has 10 feedlots in five states and can feed more than 800,000 cattle – would give the company the ability to manipulate the market to the disadvantage of independent cattle producers.

“They would be able to use tools like capping the supplies, slaughtering packer-owned cattle, and thereby manage the live cattle prices,” he said.

Bullard noted that JBS was cited last year in Brazil for allegedly engaging in anti-competitive practices. The company agreed to pay a fine of $8.5 million to an anti-trust fund.

Wesley Batista, executive director of operations for JBS Swift in Greeley, declined to comment for this story. “We cannot comment on anything, really, because of the anti-trust process,´ said Tamara Smid of JBS Swift communications.

The proposed $1.5 billion beef merger is now being reviewed by the U.S. Department of Justice to determine if it would violate anti-trust laws by creating monopolistic conditions. That review has been ongoing for the last five months but is expected to end within the next month or so.

JBS’ purchase of Swift & Co. last year made it the world’s largest beef producer.

World’s biggest brewer

In mid-July, Anheuser-Busch of Saint Louis agreed to a $52 billion takeover by Belgian-based InBev. If approved by the Department of Justice, the deal would create the world’s largest brewing company.

While the InBev takeover is a much bigger deal cash-wise, there has been little opposition raised to the move except by die-hard Budweiser drinkers. As a result, there is little doubt that the Department of Justice will approve the merger.

John W. Green, Northern Colorado regional economist, said he sees nothing but positives coming locally from the InBev-A-B merger.

“I think InBev probably won’t have much effect on this (Fort Collins) plant and any effect would probably be positive,” he said. “If this plant is not running full out, they might start brewing some (InBev) beer and expand production here.”

Green said he doesn’t expect any local downsizing as a result of the merger. “I can’t see them cutting back here because it’s one of their newest plants and the only one in the Rocky Mountain region,” he said.

The Fort Collins plant, which employs about 700, marked its 20th anniversay this year.

InBev produces such brands as Stella Artois, Beck’s, Bass Ale and Labatt. Under the proposed deal, InBev will adopt the Anheuser-Busch name and keep Saint Louis as the company’s North American headquarters. InBev’s CEO, Carlos Brito, has vowed to keep all of A-B’s 12 breweries open and not change any of its products.

Green said the JBS Swift merger would also likely be good for the region “although maybe not for the small producer.”

The deal would ensure a steady supply of cattle for the Greeley processing plant and provide more job security for its 3,000 employees. Green said the move could even eventually enable the company to expand its processing capacity in Greeley.

“It provides capital to expand and we have a locational advantage here – cattle, feed, transportation, the (Denver International) airport,” he said.