June 26, 2008
Smithfield's European subsidiary to merge with Spanish company
Smithfield Foods announced plans to merge its main European subsidiary with Spain's CampofrÃo to create a pan-European group with annual sales of more than EUR 2 billion.
The Spanish company yesterday confirmed that it was negotiating a deal with Groupe Smithfield, the Paris-based subsidiary jointly controlled by the US group and Oaktree Capital Partners.
It said both parties had "formalised a non-binding agreement of intentions . . . that sets out the preliminary terms and conditions of an eventual merger of both companies".
The merger comes at a time when high fuel and feed costs are putting pressure on the margins of food companies.
The merged entity would adopt the Campofrio name and be controlled 51.5 per cent by the Spanish group and 48.5 per cent by Groupe Smithfield.
It would be an all-share deal valuing the new entity at about EUR 1bn according to current market valuations.
CampofrÃo would issue new shares to Groupe Smithfield, which would roll its assets into the Spanish company.
Smithfield Foods has a 23-percent stake in Campo-frio, the largest meat processor in Spain, and among the biggest of its type in Europe, with processing plants in Russia and Romania.
Last year, the Spanish company reported profits of EUR 32.2 million, up 7 percent on-year, on sales which increased 12 percent to reach EUR 968 million.
It had net financial debt of EUR 134 million.
Groupe Smithfield, with sales of EUR 1.2 billion, is roughly the same size as the Spanish company. The subsidiary owns plants in Portugal, the Netherlands, Belgium and France.
The company was created in 2006 through the merger of Smithfield's Groupe Jean Caby and Sara Lea's former European meats business.
Describing the move as " a merger of equals", CampofrÃo said the planned operation would "result in the creation of a pan-European group and leader in the area of processed meats".