Smithfield Foods has made an offer for full control of the turkey group Butterball LLC.

The US meat group said today (17 June) that it had made an offer of US$200m to buy its joint venture partner’s 51% ownership interest in Butterball.

According to Smithfield, Butterball’s operating agreement says Smithfield’s partner may either accept the offer to sell or be required to purchase Smithfield’s 49% interest and its related turkey production assets.

The company expects to conclude the buy/sell decision no later than September and close before the end of the calendar year.

If Smithfield is the buyer, it will be required to retire Butterball’s debt obligations totaling approximately $215m as of 2 May. Additionally, if Smithfield is the buyer, the company anticipates that a significant amount of capital investment and marketing will be necessary to increase Butterball’s earnings potential.

Smithfield said it believes its current liquidity position will be sufficient to finance this transaction. However, the company will evaluate capital alternatives at the appropriate time.

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“Purchasing the remaining ownership interest in Butterball will afford Smithfield the opportunity to build the Butterball brand unconstrained by the restrictive terms of our current investment agreement and disagreements with our partner in respect to the development of the business. On the other hand, if we are the seller, we will have exited the turkey business at a price that we believe fairly values the operations. Either way, we will be pleased with the outcome,” said CEO Larry Pope.

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