USA: Smithfield Foods to acquire Packerland
Terms of the agreement call for Smithfield Foods to acquire 100 percent of the outstanding capital shares of Packerland in exchange for approximately 3.2 million shares of Smithfield common stock and the assumption of approximately $118 million in debt and other liabilities. Based in Green Bay, Wisconsin, Packerland is privately held by management and an outside investor.
Packerland currently has a daily processing capacity of 6,150 head and represents approximately five percent of the beef industry capacity. The company is the nation's largest supplier of Fed-Holstein beef and is regarded as the premier Holstein steer and cow operation in the country. The company's niche strategy is focused on processing and selling low-fat, low-cholesterol, lean beef products derived from Holstein steers to create final products with the highest potential yield and value for its customers.
Richard Vesta, president and chief executive officer of Packerland, will be continuing in that capacity under Smithfield ownership. "I could not be more excited about the opportunities for the newest company in the Smithfield family, particularly under the leadership of Rich Vesta," said Joseph W. Luter III, chief executive officer of Smithfield Foods. "He knows the business, has 30 years of experience in the industry and will be a valuable member of the Smithfield team.
"The acquisition of Packerland at five times EBITDA, which is immediately accretive to Smithfield earnings, makes sense for shareholders," Mr. Luter said. "In addition, the complement of beef with pork should lessen the cyclical impact of processing margins on our overall results," he said.
Packerland has many similarities to Smithfield Foods, including emphasis on superior genetics, an elite supermarket and food service customer list and a growing case-ready meat program. In addition, the strategy of genetics and product differentiation that Packerland has pursued is in concert with the philosophy Smithfield Foods has been pursuing on the pork side for more than a decade. The potential synergies for case-ready products are extremely promising. And, similar to Smithfield Foods' NPD hog strategy, Packerland focuses on the only pure-bred genetic strain of cattle currently available in the beef industry.
Smithfield Foods made its first acquisition in the beef industry in June when it purchased Moyer Packing Company, which has sales of $600 million. Moyer has a daily processing capacity of 2,375 head and about a two percent share of industry capacity. With fiscal 2001 sales of $5.9 billion, Smithfield Foods is the world's largest producer of hogs and the largest processor of pork, with a 20 percent domestic market share in pork processing. The combination of Packerland and Moyer will add a new beef processing division to the company, with more than $2 billion in annual sales, representing approximately 20 percent of total sales, and a seven percent share of the U.S. beef industry.
Packerland has 4,000 employees and plants in Green Bay, Wisconsin; Plainwell, Michigan; Tolleson, Arizona and Gering, Nebraska. Operations will not be affected by the change in ownership, the management of both companies emphasized.
Smithfield Foods has delivered a 28 percent average annual compounded rate of return to investors since 1975. In the last 15 years, the company's share price has outperformed the S&P 500 Index by more than 350 percent. With annual sales of $6 billion, Smithfield Foods is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs. For more information, please visit http://www.smithfieldfoods.com .
This news release may contain "forward-looking" information within the meaning of the federal securities laws. The forward-looking information may include statements concerning the Company's outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. The forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. These risks and uncertainties include availability and prices of livestock, raw materials and supplies, livestock costs, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards, adverse results from ongoing litigation and actions of domestic and foreign governments.
Companies: Smithfield Foods
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