ConAgra Foods and Smithfield Foods have reached a definitive agreement over the sale of ConAgra's refrigerated meats business for US$475m in cash, subject to adjustments in working capital and $100m in Smithfield shares.

The sale includes the Butterball, Eckrich, Armour, LunchMakers, Margherita and Longmont brands, as well as most of the associated assets including plants and inventory.

The combined annual sales for the refrigerated meats businesses are about $1.8bn.

"This sale is a significant milestone for ConAgra Foods, and part of an ongoing process to simplify our operations and to focus our efforts on areas of our portfolio where we have the greatest opportunities," said Gary Rodkin, ConAgra Foods president and chief executive officer. "It is a key catalyst in our plans and allows rapid progress on cost initiatives needed to fuel our future growth. I am delighted we were able to reach an agreement well in advance of our estimated timetable and for a fair value."

Proceeds divestitures could be used for a number of alternatives, including reducing debt and repurchasing shares, ConAgra said.

ConAgra will retain the Hebrew National brand and products, Brown 'N Serve frozen sausage, and Slim Jim and Pemmican meat snacks.

"This acquisition furthers our strategy of growing the packaged meats side of our business with higher-value, further-processed and pre-cooked products," said C. Larry Pope, president and chief operating officer of Smithfield Foods. "In addition, this continues our previously announced strategy of utilising our superior raw materials internally as opposed to selling in the commodity market. These brands will allow us to capture sales and marketing opportunities and more fully serve the needs of our retail and foodservice customers."

Smithfield said it plans to separate the Butterball turkey business from the non-turkey packaged meats business. Butterball will be incorporated into Carolina Turkeys, an existing partnership between Smithfield and Maxwell Farms. Smithfield owns 49% of Carolina Turkeys, the fourth largest turkey producer in the US.

"The addition of Butterball is a big positive for Carolina Turkeys' business. Butterball is well-recognised and highly trusted with strong brand equity and national distribution," said Pope.