Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 6, 1994 TAG: 9403040252
SECTION: BUSINESS PAGE: B-1 EDITION: METRO
SOURCE: By Lon Wagner STAFF WRITER
DATELINE: DAYTON LENGTH: Long
"I got paid a penny a nest for every nest I found," says Wampler, now 79 years old. "Doesn't sound like much, but it was a pretty good deal . . . and I've had some deals since then that haven't worked out quite that well."
That was before Wampler's father pioneered raising turkeys indoors. Before turkey pastrami, turkey burgers, turkey chili, turkey breast cutlets.
Wampler, known universally as "Charlie," now finds himself and the company his father started almost 70 years ago caught up in one of those deals he thinks wouldn't turn out "quite that well."
Tyson Foods Inc. hungers for turkey. The Springdale, Ark., company markets chicken, beef, seafood, and even Mexican foods like corn tortillas. But unlike Rockingham County-based WLR Foods Inc., Tyson doesn't sell turkey.
"That's the final, major, center-of-the-plate protein we need," says Tyson spokesman Archie Shaffer. "We think their turkey operations are well-run, and we think it fits well with our other products."
Don Tyson built his poultry empire - its $4.7 billion in 1993 sales makes Tyson Foods the same size as transportation giant Norfolk Southern Corp. - by gobbling up other poultry operations. Tyson's 1991 acquisition of Holly Farms made Tyson the largest poultry processor in the country.
So when Tyson wanted to complete its menu by adding turkey, it made sense to try to buy out another company rather than starting an operation from scratch.
"In this industry, it's just cheaper to grow through acquisitions than through building," says John McMillin, a Wall Street analyst with Prudential Securities Research who sells Tyson stock. "If you build, you add to the supply and knock down prices."
Tyson's offer of $329 million - or $30 per share - for WLR Foods rolled out of WLR's fax machine in Broadway, Va., after business hours Jan. 24.
The next day WLR President James Keeler issued a stern response: "We're not for sale." But the stock market was skeptical; WLR's stock jumped nearly $10, to $28.50 per share.
Tyson, now going over the heads of WLR's board to its stockholders, offered Thursday to pay $30 a share for all outstanding shares of WLR stock. Tyson already owns 5 percent of WLR's 10.8 million shares.
Because about 20 percent of WLR stock is in the hands of its poultry producers, a shareholders' vote will hinge on the loyalty of the company's 700-plus growers.
But, McMillin says, shareholder loyalty to WLR will only reach so far. He points out that WLR offered its stock last year to institutional shareholders, who have a 20 percent stake in the company, and those fund and pension managers may take the opportunity to cash in.
"It seems to me [the loyalty] argument's not going to sell real well outside of a 25-mile radius," McMillin says.
Tyson has taken its pitch to WLR's growers by featuring its own Rockingham County producers in full-page ads in the Harrisonburg newspaper. In those ads, Don Tyson has vowed to personally answer any questions producers might have about his company.
In its campaign, WLR is reminding the community of the value of a homegrown company. WLR made the largest contribution ever to the United Way of Harrisonburg-Rockingham County this year, WLR points out, and the Broadway-Timberville Chamber of Commerce named it business of the year. James Madison University President Ronald Carrier wrote a letter of support to the editor of the Harrisonburg paper.
Charlie Wampler calls this a David vs. Goliath battle, but WRL's $618 million in sales last year make it a Goliath in its own right. How did a few farmers' operations get big enough to get Tyson's attention?
During this century, farming became agribusiness - and the Wampler family deserves a claim to much of the conversion.
Sitting in his farmhouse north of Dayton, just over the hill from where his father raised the first "artificial" turkeys in the country, Charlie Wampler tells the story his wife's heard a hundred times:
It was 1922. The elder Wampler, an extension agent himself, had written to every poultry extension agent in the country to see what they thought of raising turkeys indoors. All but one, Professor A.L. Dean from Virginia Tech, thought it wouldn't work.
With only Dean's approval, Wampler gathered 100 turkey eggs, incubated them with a coal stove, and hatched 52 turkeys. With that success, he started a hatchery, feeding the turkeys onion tops and oatmeal.
Five years later, since no one sold turkey feed, he started Wampler Feed & Seed Co. Soon thereafter, Wampler made an arrangement with a cash-strapped farmer that would turn poultry farming into an industry.
George Yancey, an Elkton farmer, had a string of bad luck and couldn't afford to pay his bill at the feed store. Wampler agreed to furnish Yancey with feed and split the profit if his turkey operation worked.
Yancey was so successful, Charlie Wampler says his father rewrote the original agreement to give Yancey two-thirds of the take from the farm.
That was believed to be the first poultry-growing contract in the country; these days, about 95 percent of the chickens and turkeys raised in the United States are contracted. The big poultry companies - Tyson, Perdue, WLR - supply producers with chicks, the producers raise them in $150,000 to $200,000 houses, and the growers sell the grown chickens back to the processors about seven weeks later. For turkeys, the process takes 14 to 17 weeks.
Like Tyson, WLR Foods is actually a conglomerate of several companies. Wampler Feed & Seed joined forces with Virginia Valley Processors, another Rockingham County company, in 1968 to form Wampler Foods Inc. That gave Wampler the ability to process its own turkeys.
"I might say now, it makes a good point," Wampler says, getting in a dig at Tyson, "all of these transactions were friendly transactions."
In 1984, Wampler teamed up with a Quakertown, Pa., processor started by Horace Longacre. WLR was formed and became a public company four years later, when Wampler-Longacre bought a grower-owned processing operation called Rockingham Poultry Marketing Cooperative.
"Well," Charlie Wampler explains in simplifying the corporate mergers, "that was kind of an unwieldy name, Wampler-Longacre-Rockingham, so we went with WLR."
But the only way to buy the cooperative was to offer stock to its owners, the producers. WLR had no choice but to become a publicly traded company when it went from a few hundred shareholders to several thousand.
"That's when we became a plum for somebody to pluck," Wampler says.
The thing that worries WLR producer Ron Wampler about the possible Tyson takeover is competition, or the lack of it.
"I've been in other areas of the state where there's only one company, and I've heard some horror stories by the growers," says Ron Wampler, who is not related to the Charles Wampler family. "That one company can tell you what to do, and you have to do it.
In addition to having the capacity to raise 500,000 chickens a year, Ron Wampler is a WLR shareholder. Wampler says he's committed to holding onto his stock, and he thinks other stockholding producers will do the same, partly because of the pride involved in having a local company perform well.
"I know Jim Keeler, and I know Mr. Wampler," Ron Wampler says. "They're in the community. I can call them up and talk to them. The management lives right here in our back yard - I think that's important."
Keeler and WLR are counting on informed stockholders like Wampler to vote with their heads, not their wallets, during Tyson's tender offer for their stock. Now is the time to reap rewards, not sell out, Keeler says.
WLR, Tyson, Perdue and other chicken processing companies boomed in the 1980s, when the American public became red-meat wary and turned to poultry.
Charlie Wampler - who, incidentally, was born on Thanksgiving Day in 1915 - remembers when three-fourths of the company's turkey sales came at Thanksgiving.
"We've been the beneficiaries of millions and millions of dollars of free advertising," Wampler says, "because we've gotten health-conscious, and people are eating more chicken and turkey."
WLR and Tyson agree on one thing: Just as processed chicken became a weekly grocery shopping staple, processed turkey is about to have its day. They both believe eating turkey every day will become as common as eating Chicken McNuggets or grilled chicken sandwiches.
"The great thing about chicken is you can do a lot to it," says Tyson analyst McMillin, "but you can actually do a lot more with turkey."
Tyson thinks it could push that trend better than Wampler, since the Arkansas company has more extensive inroads in fast-food chains. After $50 million in renovations and expansions at its processing plants during the past couple of years, WLR thinks its business is lined up and ready to boom.
WLR executives see no reason to let another company harvest the benefits of their positioning.
"I've been with this company 56 years," Charlie Wampler says, "and I kind of want to keep it."
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by CNB