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Smithfield retains Goldman Sachs for advice on split-up

Smithfield retains Goldman Sachs for advice on split-up

SMITHFIELD Foods Inc., the largest hog producer and pork processor in the U.S., has retained Goldman Sachs Group Inc. to advise it on a shareholder's suggestion that the company should split into three independent, separate companies, according to wire reports.

The suggestion came from Continental Grain Co., which is one of Smithfield's largest shareholders, with about a 6% stake in the company.

Continental proposed that Smithfield divide into a hog production company, a fresh pork and packaged meats company in the U.S. and an international hog production and pork processing company in Europe (Feedstuffs, March 18).

Those are the operating segments Smithfield currently houses. The fresh pork and packaged meats company would be Smithfield.

Continental maintained that this would free up capital for Smithfield to focus on the higher-margin packaged meat sector and increase the company's value. Analysts surveyed by Bloomberg News said they believe this would raise Smithfield's stock value by 23%.

Smithfield's pork and packaged meats business in the U.S. generated $8.324 billion in sales in the first three quarters of fiscal 2013, 3.6 times hog production revenues.

Dividing Smithfield into three separate companies would be consistent with recent split-ups of other companies, including Dean Foods Co., Kraft Foods Inc. and Sara Lee Corp. (Feedstuffs, July 9, Oct. 8 and Oct. 29, 2012).

However, Smithfield chief executive officer and president C. Larry Pope has said he does not favor following in those footsteps, explaining that the company benefits from its current integrated structure in that it can adjust hog production to match pork products with customer and consumer demand.

Smithfield, based in Smithfield, Va., reported fiscal 2012 sales totaling $13.1 billion.

Volume:85 Issue:13

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