SMITHFIELD Foods Inc., the largest hog producer and largest pork processor in the U.S., apparently is saying "no" to a proposal that it divide into three independent, separate companies.
In investor presentations last week, Smithfield said a split-up would make it less competitive and less responsive to customers and, in fact, noted that major customers have urged it not to pursue the concept.
The split-up was proposed by Continental Grain Co., which is one of Smithfield's largest shareholders, with about a 6% stake.
Continental suggested that Smithfield carve itself into a hog production company and a fresh pork and packaged meat company in the U.S. plus an international hog production and pork processing company in Europe (Feedstuffs, March 18).
The fresh pork and packaged meat company would be Smithfield.
Continental maintained that hog production, which has lost money for three consecutive fiscal years, has been destructive to Smithfield's share value, causing investors to lose sight of the company's growing expertise and profitability in packaged meats.
A number of food stock analysts have suggested that Smithfield, structured exclusively in fresh pork and packaged meats, could increase its stock value almost 25%.
The company did retain Goldman Sachs Group Inc. to advise it on the proposal (Feedstuffs, April 1), but Smithfield chief executive officer and president C. Larry Pope reiterated his position that the integrated nature of the company provides the flexibility needed for innovation and responsiveness.
He noted that this assures Smithfield of a consistent, high-quality and traceable pork supply and has let it move its hog farms to group pens for pregnant sows for foodservice and retail customers in the U.S. as well as to ractopamine-free herds for customers overseas, such as China, which recently banned pork containing ractopamine residues.
Smithfield also said hog production has been hit by record-high and volatile corn prices in recent years due to the draw on corn for ethanol production. However, the company said this draw is reaching a plateau, and corn prices -- barring weather problems -- should decrease and stabilize in the years ahead.
Smithfield's investor presentation is available at www.smithfield.com under the "Investors" link.
Smithfield, with headquarters in Smithfield, Va., reported fiscal 2012 sales totaling $13.1 billion.
Volume:85 Issue:14