Smithfield Foods, Inc. and Premium Standard Farms, Inc. announced recently that their Boards of Directors have unanimously approved a definitive merger agreement under which Smithfield Foods will acquire all of the outstanding shares of Premium Standard Farms through a merger.
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The agreement has a total transaction value of approximately $810 million, including the assumption of PSF’s approximately $117 million of net debt.
The transaction is expected to close in the first calendar quarter of 2007.
PSF is the nation’s second largest pork producer and sixth largest pork processor, with approximately 4,300 employees working at farms and processing facilities in Missouri, North Carolina, and Texas.
PSF is a major property holder in northern Missouri. A processing plant is located in Milan, and hog farms are concentrated in Mercer, Putnam and Sullivan counties.
For the twelve months period ended at the June 24, 2006 close of PSF’s fiscal first quarter, PSF had net sales of $880 million and net income of $45.3 million.
With sales of $11 billion, Smithfield is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs.
Smithfield has also acquired Farmland Industries, Murphy Farms, ConAgra Foods and the European meats business of Sara Lee.
Under the terms of the merger, each PSF share will be converted into the right to receive 0.678 Smithfield shares plus $1.25 in cash. The total combined value of stock and cash is $21.35, based on Smithfield’s average closing price on the New York Stock Exchange over the most recent 10-day trading period. The share exchange portion will be tax-free to PSF shareholders.
In connection with this transaction: — All current PSF hog production contracts will be honored, giving PSF’s independent hog producers the certainty and security of contractual supply relationships; and — Smithfield will remain 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, continuing to serve their customers.