March 7, 2008

Smithfield exits beef business to focus on debts and pork production
 

Meat processing giant Smithfield Foods has quit the beef business in order to focus on its debts and the potential expansion of its pork business.
 

The company could gain about US$765 million from selling its beef business, which includes Five Rivers Ranch Cattle Feeding LLC, four slaughter plants and 10 feedlots.

The money will be used to pay off the company's debts, which were accumulated last year when Smithfield went on an acquisition spree, according to Larry Pope, CEO of Smithfield.

Pope said the company will not have additional acquisitions until it paid off some debts and previous acquisitions are integrated, which would give them time to pursue opportunities in the pork business.

In May 2007, Smithfield failed to acquire Swift & Co., which was bought by JBS with about US$1.5 billion. As a result, Smithfield was left with feedlots that could not efficiently service its beef plants.

Smithfield had also pulled the plug on its plans to build a 5,000 head-per-day beef slaughterhouse in Hooker, Oklahoma.

Pope said that the company wanted to increase its market share in the beef business but it had failed to do so, and current economics in the beef market do not justify a new beef plant.

"JBS approached us and asked if we were interested in exiting the beef business. Well, we started talking and eventually struck a deal," said Pope.