Smithfield Foods Agrees To Buy Premium Standard

Smithfield Foods Agrees To Buy Premium Standard

Smithfield Foods Agrees To Buy Premium Standard

The nation's largest pork producer, Smithfield Foods Inc. agreed to purchase the country's second-largest producer, Premium Standard Farms Inc., in a deal valued at about $810 million, including the assumption of about $117 million in debt.

Under terms of the deal, each Premium Standard share will be converted into the right to receive 0.678 Smithfield shares plus $1.25 in cash. Smithfield, of Smithfield, Va., said it expects the deal to be accretive to earnings per share upon closing, which is forecast to happen in the first calendar quarter of 2007.

Premium Standard shares ran up sharply late Friday afternoon, suggesting that traders might have caught wind of a possible transaction. Trading volume was triple the average rate, and the company's shares rose 6.8%, or $1.13, as the trading day came to a close.

The deal will solidify Smithfield's lead as the nation's largest hog producer, giving the company nearly 18% of the production market, based on figures contained in a presentation on Premium Standard's Web site. Those figures equal about 1,070,000 hogs during 2005, out of a total industry production figure of about 6,000,000.

Smithfield is also the nation's largest hog processor, though Premium Standard isn't as strong in this area, ranking sixth among all processors.

The deal would seem to present the possibility of an antitrust review, though Smithfield officials are confident the deal will pass muster with authorities. Indeed, antitrust suits and conditions have been relatively rare over the last year, as merging companies have only had to make slight concessions if at all.