July 4, 2006

Smithfield crosses the Atlantic with a billion-dollar expansion plan

Smithfield Foods Inc announced last week it would acquire the European meats business of Sara Lee Corp so as to deepen its presence in the European market.

The acquisition would include popular European ham labels and aid America's largest pork producer in gaining a foothold in the European market.

Smithfield's US$575 million deal is scheduled to be closed by the end of September.

The acquisition would be financed through a 50-50 joint venture with Oaktree Capital Management LLC in which both companies would contribute equity, with Smithfield including its Jean Caby business in France.

Oaktree is an equity investment firm with more than $30 billion of assets under management.

The joint venture would be run like an independent business and would operate similarly to Smithfield's cattle-feeding joint venture, Five Rivers Ranch.

Earnings are expected to be split 50-50 between Oaktree and Smithfield, according to Smithfield spokesperson Jerry Hostetter.

Robert A. Sharpe II, current president for international operations at Smithfield, would be CEO of the new business.

The Sara Lee group, headquartered in the Netherlands, has operations based in France, Portugal and the Benelux region in Belgium, Holland and Luxemburg. Its brands include several well-known European names.

The business would be largely that of a further-processor and would source pork from local packers, Sharpe said, adding there are no plans at present for the business to emulate the integrated model used by Smithfield in the US.