Court Document: Most Chicken Growers Support Tyson/George's Deal

Most contract chicken growers are supportive of George’s purchase of the Tyson Foods poultry complex in Harrisonburg and are “deeply concerned” the U.S. Department of Justice lawsuit over the acquisition “may jeopardize their livelihoods,” according to a court document filed Monday.

The memorandum that will be submitted in federal court for the Western District of Virginia includes declarations signed by approximately 90 percent of the broiler growers in the Harrisonburg complex, who indicate they are concerned that if the sale to George’s is set aside, “there might not be another integrator that is able to take over the plant and run it at full capacity.”

The declarations also note the growers believe “George’s commitment to increase production will provide me with the opportunity to raise more birds and make more money than I was able to do at Tyson.”

The court filing notes that, contrary to government claims, the Department of Justice was fully aware in early May that George’s and Tyson Foods were close to completing the sale of the poultry complex. Government officials also knew the companies were not required by law to provide them with any notice before the sale was finalized.

George’s filing asks the court to expedite the case, since the government’s lawsuit threatens the company’s ability to turn the Harrisonburg complex “into a profitable and growing operation.” The company has proposed a seven-week schedule, while the government has proposed “an alternative schedule that is four times longer…and has the consequence of harming the very growers that Plaintiff claims to be protecting.”

The filing notes the Harrisonburg complex had lost more than $10 million over the past three years. As a result, the facility was operating substantially below capacity. George’s bought the facility because it would be able to share costs with its nearby Edinburg facility and subsequently increase production, benefiting growers, employees and consumers. The company wants to increase production; however, according to the court document, it will be unable to do so “while this action is pending.”

According to George’s, such a delay harms, among others, the company and contract growers. It “would extend the cloud over Harrisonburg well past the critical August contracting period for sales from the plant and it unnecessarily harms growers who are unable to get financing…”

George’s also sent a letter to local poultry growers Monday in response to news reports questioning whether the Harrisonburg complex could have been purchased and operated by a cooperative association or ‘co-op’ of poultry growers.

After noting every grower is entitled to form their own opinion about the sale, the company pointed out that it bought the assets of Tyson’s Harrisonburg complex for $3.1 million, but that the purchase did not include any inventory, certain trucks and trailers, customers or technology systems.

George’s had to pay an additional $9 million for the existing inventory of birds, feed, supplies and feed ingredients and another $700,000 for remaining trucks and trailers. A co-op would also need to purchase this same inventory in order to operate the plant without disruption and since the co-op would have no existing transportation resources like George’s it would likely have to pay more than $1.5 million for trucks and trailers.

The sale did not include the transfer of Tyson’s customer base; however, George’s has existing national foodservice customers to whom they can sell product from Harrisonburg. A co-op would not have an existing customer base.

According to the letter, the Harrisonburg plant is small and historically inefficient and had been operating at a significant loss. George’s has a nearby chicken complex in Edinburg and will be able to take advantage of geographic synergies, saving significant dollars annually.

It also has a plan for turning the plant around and making it profitable. A co-op would not have the same synergies and would likely have to absorb substantial financial losses unless and until the plant became profitable, if ever.

George’s officials believe the plant needs at least $5.4 million in repairs and improvements to have a chance at profitability. A co-op would need to make a comparable investment. George’s already maintains some of the technology systems and is buying additional technological equipment necessary to run the complex. A co-op would need to buy its own systems, which would cost as much as $1.5 million.

The letter from George’s questions if a co-op owned and operated the complex and subsequently failed, “would the co-op have a way to meet its contractual obligations to the 121 growers…?” In addition, such a failure “would cost the 500 community residents that work at this plant their jobs.”

The court filing also notes that George’s has agreed to honor and extend the contracts of all of the broiler growers at the Harrisonburg plant.


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