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Smithfield, Premium Standard Farms announce merger

Agriculture.com Staff 09/18/2006 @ 8:48am

Smithfield Foods, Inc. and Premium Standard Farms, Inc. today announced their boards of directors have unanimously approved a definitive merger agreement under which Smithfield will acquire all of the outstanding shares of Premium Standard Farms (PSF).

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 agreement has a total transaction value of approximately $810 million, including the assumption of PSF's approximately $117 million of net debt.

Smithfield and PSF stated that ContiGroup Companies, Inc., which owns 38.8% of PSF stock, has signed a shareholder support agreement committing to vote its PSF shares in favor of the transaction. The transaction is expected to close in the first calendar quarter of 2007.

PSF has approximately 32.0 million shares outstanding. Smithfield will issue approximately 21.9 million shares in exchange for PSF shares. Smithfield officials stated today they expect the transaction to be accretive to its earnings per share following closing.

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;
  • Smithfield will remain committed to purchasing significant numbers of hogs on the open market;
  • PSF's facilities will remain open and in operation at least at current production levels, continuing to serve their customers.

"Strategically, this is a very good long-term fit and near-term, this combination should generate benefits for both organizations and our customers," said C. Larry Pope, Smithfield CEO.

"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," said John Meyer, Premium Standard Farms CEO.

For the 12-month period ending June 24, 2006, PSF had net sales of $880 million and net income of $45.3 million.

Smithfield Foods, Inc. and Premium Standard Farms, Inc. today announced their boards of directors have unanimously approved a definitive merger agreement under which Smithfield will acquire all of the outstanding shares of Premium Standard Farms (PSF).

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