The boards of directors of Smithfield Foods, Inc. and Premium Standard Farms, Inc. (PSF) have announced the merger of the two companies. Under the agreement announced last month, Smithfield will acquire all of the outstanding shares of PSF for $810 million, including assumption of PSF’s approximately $117 million of net debt.
The transaction is expected to be approved by PSF’s shareholders, and is projected to close in the first quarter of 2007. In connection with this transaction:
- All current PSF production contracts will be honored;
- Smithfield remains committed to purchasing significant numbers of hogs on the open market; and
- PSF’s facilities will remain open and in operation at least at current production levels to continue to serve their customers.
“We are excited about the combination of PSF and Smithfield,” says C. Larry Pope, Smithfield’s president and chief executive officer. “This is a business we know very well and it relates directly to our core competence. We have strong expertise in both live hog production and in fresh pork processing. Strategically, this is a very good long-term fit, and near-term, this combination should generate benefits for both organizations and our customers.”
PSF President and Chief Executive Officer John Meyer adds: “Our agreement to merger with Smithfield enables PSF’s shareholders to receive an immediate premium for their shares and continue to participate in the growth of Smithfield, a well-capitalized company with one of the best records of creating long-term shareholder returns of any company in any industry. As part of Smithfield, we will continue to execute our strategy and provide attractive opportunities for our employees, our customers, our hog producers and the communities in which we live and work.” Federal regulators must also approve the proposed merger between the nation’s two largest hog producers.
Sen. Charles Grassley (R-IA) has asked the Justice Department to review the proposed merger. He suggested that the merger would hurt independent farmers by increasing Smithfield’s control over hog production.
“Over the last several years, Smithfield has made it perfectly clear that it intended to purchase its competitors to assert dominance in the pork industry,” says Grassley in a letter to the Justice Department’s antitrust division.
Sen. Tom Harkin (D-IA) has also requested the department review the transaction.
The department could move to block the merger on antitrust grounds or require the companies to sell some of their assets.
