Smithfield Foods To Buy No. 2 Pork Producer Premium Standard Farms
Posted September 18, 2006 9:22 a.m. EDT
RALEIGH, N.C. — Premium Standard Farms, which employs more than 1,500 people in Clinton and contracts with farmers to produce pigs across several Eastern North Carolina counties, is being acquired by Smithfield Foods.
The deal, which has already been approved by the boards of directors at both firms, combines the nation's No. 1 and No. 2 pork producers with Smithfield being the largest.
Smithfield, which also maintains large production facilities in the state, said Monday morning that it would buy Premium Standard Farms (PSF) for some approximately $693 million in cash and stock. Smithfield will also assume some $117 million in PSF debt. PSF's headquarters are in Kansas City, MO. Smithfield is based in Smithfield, VA.
Smithfield (NYSE: SFD) will pay $21.35 a share for PSF (Nasdaq: PORK). The deal is expected to close early next year.
The news sent PSF stock soaring more than 12 percent, or $2.12, to $19.85 in mid-morning trading. Smithfield stock, meanwhile, dropped 3.6 percent, or $1.05, to $28.19.
In a statement, Smithfield said all contracts with PSF "will be honored" and added that PSF facilities will operate "at least at current production levels".
That's good news for the workers in Clinton. More than 1,200 work in a massive procession plant that covers 800,000 square feet. The facility was remodeled in 2002 and processes 9,100 hogs a day, or 2.6 million a year.
Another 300 people work at a production facility in Clinton.
PSF also owns nine farms where 20,000 sows are maintained. The company contracts with farms to house another 47,000 hogs.
Additionally, PSF has marketing contracts with farmers in Duplin, Greene, Pitt and Sampson counties for another 37,000 sows.
According to the company, PSF pays $46 million annually to contract producers in North Carolina.
PSF generated $880 million and had a profit of $45.3 million in the 12 months ending June 24 of this year. Smithfield has annual sales of $11 billion.
Smithfield and its subsidiaries operate facilities across North Carolina. Smithfield recently announced plans to close a Virginia plant and move that production to its massive facility in Tar Heel.