LITTLE ROCK, Ark. (AP) – People who sold their shares in IBP Inc. when they heard poultry giant Tyson Foods Inc. had aborted its purchase of the meatpacking company may file a class-action lawsuitagainst Tyson, a federal court ruled.
U.S. District Judge Sue Robinson decided that IBP shareholders who sold stock between March 29, 2001, and June 15, 2001, could sue Tyson on grounds of making false statements that unnaturally drove down IBP’s stock price.
Springdale, Ark.-based Tyson became the world’s largest meat producer when a chancery court ruled in June 2001 that it must complete the IBP purchase. Tyson tried to halt the deal in March, saying IBP failed to disclose a federal accounting probe involving DFG Foods, the meatpacker’s Chicago-based canape and appetizer subsidiary.
But South Dakota-based IBP went to court and compelled Tyson to complete the $4.7 billion purchase.
Tyson spokesman Ed Nicholson called Wednesday’s ruling “a normal procedural development. We will continue to vigorously defend this suit.”
Karin E. Fisch, a New York attorney for the potential plaintiffs, said a class action by sellers, rather than buyers of stock, is rare. Also, she said the chancery court’s decision to force the two companies to merge is unique.
But the strategy against Tyson would be the same as in typical shareholder cases.
“Fraud on the market claims are pretty standard, but normally they try to prove the stock price has been artificially inflated,” she said. “In this case, we’re saying it was artificially deflated.”
Robinson noted in her opinion that “the market sharply reacted to Tyson’s announcement, with IBP’s common share price dropping from $27.79 per share at the close of business March 29, to a low of $15 on March 30, 2001.”
There could be hundreds of participants in the class action, Fisch said.
She said that institutional shareholders were abundant at the time, because of the proposed merger. Four hedge funds, Aetos Corp., Pelican LP, Stark Investments LP and Shepherd Investments International Ltd., lost more than $20 million on IBP stock and were named representatives for the class action.
