Smithfield Foods to acquire Packerland
Virginia-based Smithfield Foods, Inc. said last week it is to acquire Packerland Holdings, Inc., the fifth largest beef processor in the United States, for $250 million.
Under the terms of the agreement, Smithfield Foods will acquire all Packerland’s shares in exchange for approximately 3.2 million shares of Smithfield common stock and the assumption of approximately $118 million in debt and other liabilities. Based in Green Bay, Wisconsin, Packerland is privately held by management and an outside investor.
Packerland currently has a daily processing capacity of 6,150 head and represents approximately five percent of the beef industry capacity. The company is the nation’s largest supplier of Fed-Holstein beef and is regarded as one of the country’s most progressive Holstein steer and cow operations.
Richard Vesta, president and chief executive officer of Packerland, will be continuing in that capacity under Smithfield ownership.
"The acquisition of Packerland at five times EBITDA, which is immediately accretive to Smithfield earnings, makes sense for shareholders," said Joseph W. Luter III, chief executive officer of Smithfield Foods. In addition, the complement of beef with pork should lessen the cyclical impact of processing margins on our overall results,"
Packerland has many similarities to Smithfield Foods, including emphasis on genetics. Packerland focuses on the only pure-bred genetic strain of cattle currently available in the beef industry.
Smithfield Foods made its first acquisition in the beef industry in June when it purchased Moyer Packing Company, which has sales of $600 million. Moyer has a daily processing capacity of 2,375 head and about a two percent share of industry capacity. With fiscal 2001 sales of $5.9 billion, Smithfield Foods is the world’s largest producer of hogs and the largest processor of pork, with a 20 percent domestic market share in pork processing. The combination of Packerland and Moyer will add a new beef processing division to the company, with more than $2 billion in annual sales, representing approximately 20 percent of total sales, and a seven percent share of the U.S. beef industry.
Packerland has 4,000 employees and plants in Green Bay, Wisconsin; Plainwell, Michigan; Tolleson, Arizona and Gering, Nebraska. Operations will not be affected by the change in ownership, the management of both companies emphasised.
