Bloomberg News

Smithfield Completes Acquisition of Premium Standard

May 07, 2007

Smithfield Foods Inc. (SFD:US), the world's biggest pork producer, completed its purchase of Premium Standard Farms Inc., boosting the company's hog production by 30 percent. The shares rose to a two-year high.

Under the terms of the deal, each holder of a Premium Standard share will get 0.678 Smithfield share plus $1.25 in cash, Smithfield said today in a statement. The purchase price was approximately $800 million, including the assumption of about $125 million in debt, Smithfield said.

The acquisition boosts Smithfield's share of U.S. pork- processing to 31 percent and hog production to 19 percent, the company has said. In the past year, Smithfield has spent almost $2.2 billion on acquisitions, including ConAgra Food Inc.'s meat unit and Sara Lee Corp.'s European meat businesses. The company is based in Smithfield, Virginia.

Smithfield said regulatory restrictions had prevented the company from exploring all cost ``synergies'' and possible ``commercial opportunities'' related to the acquisition.

With the deal complete, ``we can explore them now,'' Smithfield spokesman Jerry Hostetter said. Premium Standard Farms was the second-biggest U.S. hog producer and sixth-biggest pork processor. Hostetter didn't say how much in cost savings potentially were identified.

``We haven't decided yet how Premium Standard Farms will fit in our organization but will be doing so over the coming months,'' he said.

Premium Standard, based in Kansas City, Missouri, raises about 4.1 million hogs a year, compared with Smithfield's 14.2 million. The U.S. slaughters about 100 million hogs a year.

Smithfield shares (SFD:US) rose 70 cents, or 2.3 percent, to $31.49 at 4:26 p.m. in New York Stock Exchange composite trading, after earlier touching $31.60, the highest since April 2005. The stock has risen 13 percent in the past year. Shares of Premium Standard closed at $21.82 on May 4 on the Nasdaq Stock Market. They had gained 27 percent in the past year.

To contact the reporter on this story: Daniel J. Goldstein in Washington at dgoldstein1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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