Tuesday, August 26, 1997

Hudson Foods says seeking buyer for beef plant

By MEERA SOMASUNDARAM

Dow Jones News Service

MINNEAPOLIS - Hudson Foods Inc., reeling from a massive national recall of ground beef and a damaged public image, said Monday it is seeking a buyer for its beef processing plant in a move to exit that industry.

Beef processing, a relatively new venture for Hudson, represents just about 6.6 percent, or $91 million, of the company's total sales of $1.4 billion.

Hudson has only one raw-beef processing plant, located in Columbus, Neb. Last week the U.S. Department of Agriculture ordered the temporary closing of the plant after at least 16 people in Colorado became sick from eating burgers linked to Hudson's beef products. Since Aug. 12, 25 million pounds of ground beef has been recalled after the department and Hudson said some meat processed by the Rogers, Ark., company may have been contaminated with a deadly strain of bacteria.

Since then, the recall has received wide press coverage and a contract termination by at least one key supplier: Burger King, a Miami-based unit of Grand Metropolitan PLC.

The end of this contract is a key impetus for the sale, said Hudson Treasurer Tom D. Reynolds. He said the company now has two options for its beef plant: either seek another major customer for the plant or sell it.

Selling the plant "makes most sense," Reynolds said, because that would be the quickest way to return its 230 idle employees to work. In addition, finding another customer when the company is receiving negative media attention would be a difficult proposition.

"We're primarily a poultry company," Reynolds said. "We (built the plant) at Burger King's request. Now that they're no longer a customer, getting out of the business makes the most sense."

He said selling the plant to a major beef packer - a raw material supplier that does slaughtering - makes the most sense.

The plant at Columbus is three or four years old and cost about $35 million to build, he said, adding that the company would be unable to reopen it without another major customer.

Anxious investors again pushed the stock down Monday, before news of the possible sale was released. Shares closed at $14.31-1/4, down 87-1/2 cents, or 5.8 percent, on the New York Stock Exchange. The stock closed Aug. 12 at $16.25.