July 31, 2006

EU approves Smithfield's acquisition of Sara Lee's European meat business

The European Commission Friday (Jul 28) gave pork processor Smithfield Foods Inc regulatory approval to buy the European meats business of food and apparel company Sara Lee Corp, saying the deal would not cause antitrust problems in Europe.

Smithfield will form a 50 percent-owned joint venture with Oaktree Capital Management LLC to buy the unit, which has brands such as Aoste and Imperial, from Sara Lee for US$575 million in cash, plus the assumption of up to US$39 million in pension-related liabilities.

Smithfield said it will contribute its French subsidiary, Jean Caby, to the joint venture, bolstering its other operations in France, Poland, Romania and Britain.

The EU said the French tie-up was the most significant overlap between the two companies but it would not hurt competition because the combined company would continue to face several effective competitors for all products at stake.

Jean Caby had sales of US$372 million in fiscal 2006 and is a major producer of branded and private label processed meats in France and other European countries.

The deal is expected to close by the end of September.

Sara Lee said it is selling off the unit in order to focus on large branded divisions that can contribute to strategic growth.

Oaktree is an investment management firm with approximately US$30 billion of assets under management in specialised investment strategies. With sales of US$11 billion, Smithfield is a leading processor and marketer of fresh pork and processed meats in the US, as well as the world's largest producer of hogs.