Tyson Foods (Tyson), the nation’s largest chicken processor, broke off its agreement to acquire IBP, the nation’s largest meatpacking firm, and IBP subsequently filed a breach of contract suit.
Retained by Wachtell, Lipton, Rosen & Katz
Tyson Foods (Tyson), the nation’s largest chicken processor, broke off its agreement to acquire IBP, the nation’s largest meatpacking firm, and IBP subsequently filed a breach of contract suit. In response, Tyson alleged that IBP had misled it about accounting problems at an IBP unit and had breached a representation in the merger agreement that IBP’s financial statements were materially accurate when it restated its prior financial statements. IBP’s counsel retained Cornerstone Research and an accounting expert to examine liability issues and testify about Tyson’s allegations.
In his decision, the judge cited the accounting expert’s testimony and called him “a distinguished expert.”
The expert testified that the problems at the IBP unit and restatements were not material from an acquirer’s standpoint. He first explained the concept of materiality in general and as it applied to this case. The expert then demonstrated how the restatements and alleged nondisclosures, if included, would not have materially affected the pro forma financial information that Tyson’s investment banker prepared for Tyson’s board to use in making its decisions. Thus, the expert showed that, had the pro formas included the effects of the events, the end result would have been the same.
The suit was tried in the Delaware Court of Chancery, which ruled that Tyson had improperly broken its takeover agreement with IBP. In his decision, the judge cited the expert’s testimony and called him “a distinguished expert.” Two weeks later, Tyson agreed to honor its commitment to acquire IBP in a deal valued at about $2.7 billion.