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Sep. 18, 2006 Source: PRNewswire Smithfield Foods Inc. and Premium Standard Farms Inc. today announced that their Boards of Directors have unanimously approved a definitive merger agreement under which Smithfield Foods will acquire all of the outstanding shares of Premium Standard Farms through a merger. Under the terms of the merger, each PSF share will be converted into the right to receive 0.678 Smithfield shares plus $1.25 in cash. The total combined value of stock and cash is $21.35, based on Smithfield's average closing price on the New York Stock Exchange over the most recent 10-day trading period. The share exchange portion will be tax-free to PSF shareholders. The agreement has a total transaction value of approximately $810 million, including the assumption of PSF's approximately $117 million of net debt. Smithfield and PSF stated that ContiGroup Companies Inc., which owns 38.8 percent of PSF's stock, has signed a shareholder support agreement committing to vote its PSF shares in favor of the transaction. The transaction is expected to close in the first calendar quarter of 2007. PSF has approximately 32.0 million shares outstanding. Smithfield will issue approximately 21.9 million shares in exchange for PSF shares. Smithfield stated that it expects the transaction to be accretive to its earnings per share following closing. In connection with this transaction: All current PSF hog production contracts will be honored, giving PSF's independent hog producers the certainty and security of contractual supply relationships; Smithfield will remain committed to purchasing significant numbers of hogs on the open market; and PSF's facilities will remain open and in operation at least at current production levels, continuing to serve their customers. For the 12 months period ended at the June 24, 2006, close of PSF's fiscal first quarter, PSF had net sales of $880 million and net income of $45.3 million. "We are excited about the combination of PSF and Smithfield," said C. Larry Pope, Smithfield's president and CEO. "This is a business we know very well. and it relates directly to our core competence. We have strong expertise in both live hog production and in fresh pork processing. Strategically, this is a very good long-term fit and near-term, this combination should generate benefits for both organizations and our customers." John M. Meyer, PSF's president and CEO, said, "Our agreement to merge with Smithfield enables PSF's shareholders to receive an immediate premium for their shares and continue to participate in the growth of Smithfield, a well-capitalized company with one of the best records of creating long-term shareholder returns of any company in any industry. As part of Smithfield, we will continue to execute our strategy and provide attractive opportunities for our employees, our customers, our hog producers, and the communities in which we live and work." Paul J. Fribourg, a director of PSF and chairman, president and CEO of ContiGroup, PSF's major shareholder, stated, "We are very pleased to support the combination of PSF with Smithfield, and we look forward to continuing to participate in the growth of the combined company." The transaction will require customary regulatory approvals as well as the approval of PSF's shareholders. Tweet |
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