US/SPAIN: Smithfield ends plan to take control of Campofrio
By Dean Best | 3 June 2011
US meat company Smithfield Foods has ended talks to buy a controlling stake in Campofrio Food Group.
Smithfield was in discussions with Campofrio chairman Pedro Ballve to jointly acquire the remaining shares in the Spanish processed meats firm.
However, in a surprise announcement today (3 June), Smithfield president and CEO Larry Pope said European economic conditions and the fall in the US firm's share price had influenced the decision.
"While the acquisition of Campofrio would have furthered Smithfield's long term strategy of becoming a leading global consumer packaged meats company, we feel it is in the best interest of our shareholders to terminate negotiations at this time," Pope said.
"Our decision has been influenced by numerous factors including continued adverse economic conditions in Europe that show few signs of abating, and the recent decline in our stock price, which has made the proposed transaction more difficult to finance on a basis that is accretive to our shareholders."
In April, when Smithfield announced the talks with Ballve, it said it needed around EUR500m (US$724.7m) to buy the shares in Campofrio. The company said the money would come from "existing liquidity and capital markets financings".
Smithfield is the largest shareholder in Campofrio, with 37% of the business. Smithfield attained the stake when it merged its European operations into Campofrio in 2008, a deal that created Europe's largest packaged meats firm. Before that deal, Smithfield owned 24% of Campofrio. Smithfield first acquired shares in Campofrio in 2004.
Pope said today that Smithfield remained "committed" to holding its stake in Campofrio and would "support the company's continued growth and development as Europe's leading packaged meats company".
He added: "In particular, we will continue to look for ways to capture and enhance synergies between Campofrio and Smithfield for the companies' mutual benefit, despite the inability merge the companies at the present time."
Sectors: Chilled foods, Meat & poultry, Mergers & acquisitions
Companies: Campofrio, Smithfield Foods
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