Meat + Poultry - September 2006 - 28

Smithfield

acquisition opened new markets, including bacon, hot dogs, precooked sausages, and branded, precooked entrees,
to name a few, and each new market has
allowed the company to maintain control of its raw materials rather than sell
them to other processors.
In early August, the company signed
an agreement to acquire the branded
meats business of ConAgra Foods, Inc.,
Omaha, for $575 million. Under the
terms of the agreement, ConAgra will
receive $475 million in cash and $100
million in Smithfield stock for most of
the assets associated with the brands,
including plants and inventory. The
brands sold include Armour, Butterball,
Eckrich, Margherita, Longmont and

LunchMakers. Their combined annual
sales are approximately $1.8 billion.
At the beginning of the year,
Smithfield also acquired the assets
of ConAgra's Cook's Ham business.
Based in Lincoln, Neb., Cook's produces traditional and spiral sliced smoked
bone-in hams, corned beef and other
smoked meat items. The company has
manufacturing facilities in Lincoln, as
well as Grayson, Ky., and Kansas City,
Mo., and annual sales of approximately
$330 million.
"After recent expansion in bacon capacity, the company has become a net
buyer of bellies," said Jerry Hostetter,
vice president of investor relations and
corporate communications. "We have

Smithfield's history of acquisitions
Domestic

International

1981

1998

1999

Gwaltney

SBS (France)
Schneider (Canada)

Carroll's Foods

Patrick Cudahy

1999

Murphy Farms

1985

Animex (Poland)
SFGP (France)

2002

2000

2003

Mitchell's (Canada)
NORSON (Mexico JV)

Alliance Farms

2002

MF Cattle Feeding

1984
Esskay

1992
Valleydale

1995
John Morrell

AFG (China JV)

1996
Lykes Meat Group

1998
North Side Foods
Quik-to-Fix Foods
Moyer Packing
Packerland

2002
Stefano Foods

2003
Farmland
Cumberland Gap

2006
ConAgra Foods'
branded meat
Cook's Hams
I

MEAT&POULTRY

2003
Smithfield Foods Ltd.
(U.K.)

2000
Vall, Inc.

2004
2005
Five Rivers Ranch
Cattle Feeding JV

2004

2001

Vertical Integration

Smithfield Procesare
S.R.I. (Romania)
Jean Caby (France)
Morliny (Poland)
Comtim Group
(Romania)

2006
Sara Lee's
European
meat
business

September 2006

www.MEATPOULTRY.com

increased precooked bacon capacity by
40 percent this year, emerging as a major provider to the foodservice industry,
which is undergoing a transition from
raw to precooked bacon."
The company also opened a new
$100 million ham plant this past August. With the opening, the company
has become a net buyer of hams and
should increase its margins.
"We put forward about two years ago
the fact that this company was going to
make it a point and a strategy to utilize
our hams and bellies internally," said
Pope. "We have continued to move in
that direction, both organically through
some of the investments we've made in
the ham category as well as the investments we've made in the precooked
bacon category with the acquisition of
Cook's and now the pending acquisition
of ConAgra.
"These additions, combined with
where we are today, should give us a
giant processed meats business, and the
3 billion-pound-plus range should make
us a major supplier to the deli, foodservice and retail categories."

Integrating Europe
In 1998, Smithfield Foods made its
first foray into Europe with the acquisition of SBS, a French company. A year
later, Smithfield acquired Animex, a
Polish pork processor. It followed with
additional investments in Romania,
France and Poland in 2004 and, most
recently, with the acquisition of Sara
Lee Corp.'s European meats business.
Sara Lee's business generated $1.1 billion in sales in fiscal 2005 and holds
its largest positions in France and Portugal, and features brands such as
Aoste, Justin Bridou and Nobre.
The company also has a presence in Germany, Italy and
the United Kingdom.
To finance the acquisition,
Smithfield entered into a 50
percent-owned joint venture with Oaktree Capital
Management L.L.C. As part

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Meat + Poultry - September 2006

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