By Staff writer
Smithfield Foods, a leading processor and marketer of fresh pork and processed meats in the USA, has reached an agreement to acquire Premium Standard Farms (PSF), one of the country’s biggest providers of pork products.
Smithfield will acquire all of the outstanding shares of PSF and under the terms of the deal, each PSF share will be converted into the right to receive 0.678 Smithfield shares plus US $1.25 in cash. For the twelve months ended June 24, 2006, PSF had net sales of US $880 million and net income of US $45.3 million.
As part of the deal, all current PSF hog production contracts will be honored, giving PSF’s independent hog producers the certainty and security of contractual supply relationships.
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, and will continue to serve their customers, the company said.
John M. Meyer, PSF’s president and chief executive officer, said: “Our agreement to merge 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-capitalised 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.” The transaction will require customary regulatory approvals as well as the approval of PSF’s shareholders. Smithfield has delivered a 24% average annual compounded rate of return to investors since 1975.