Major hog producer Smithfield Foods is currently in talks to buy out holding company Smithfield Cos, after the two companies signed an exclusivity agreement that gives them 20 days to negotiate a potential transaction.


According to an amendment of Schedule 13D, which was filed with the Securities and Exchange Commission (SEC) yesterday, Smithfield Foods could complete the buyout for US$8.5 per share in cash. This values each share at US$1.5 above their current over-the-counter trading value. The company stressed however that there are no guarantees a transaction would be completed at that price, which values the offer at US$143m.


Smithfield Foods already holds 428,296 shares, which corresponds to a 20.3% stake, in the firm, which produces speciality food products through its operating units. These include The Smithfield Ham & Products Co, V.W. Joyner & Co, Pruden Packing Co, Williamsburg Foods and E.M. Todd Co. Shareholder approval will be necessary if Smithfield Foods is to hold more than two-thirds of Smithfield Cos’ common shares.


Any buyout will also be subject to due diligence and a definitive merger pact.