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Smithfield and Campofrio Agree to Merge

by 5m Editor
1 July 2008, at 9:58a.m.

US - It was announced yesterday that Groupe Smithfield Holdings, S.L., has agreed to merge with Campofrio Alimentacion, S.A., the largest processed meats company in Spain.

Campofrio, a publicly-traded company on the Spanish Stock Exchanges, will issue shares to Smithfield Foods and Oaktree in exchange for all of the membership interests in Groupe Smithfield. Smithfield, which currently owns 24 percent of Campofrio, will own 36 percent of the combined company after the merger.

The merger will form the leading pan-European company in the processed meats sector with sales of more than $3 billion, leading market shares in Spain, France, Belgium and Portugal and a strong presence in The Netherlands, Romania and Russia. The combined company will be headquartered in Madrid, and will continue to operate under the Campofrio name. Campofrio products are distributed in over 40 countries and Groupe Smithfield has a presence in seven major markets in Europe.

The two companies expect to achieve substantial synergy opportunities in sourcing, manufacturing, and capital expenditures and believe that they offer a platform for future growth.

"This is another key milestone in Smithfield's strategy to enhance its processed meats presence globally. The two companies are very complementary and merging them will provide many significant synergy opportunities," said C. Larry Pope, Smithfield president and chief executive officer. "There is a clear correlation between an operation's size and profitability in European processed meats and this merger will make the combined Campofrio-Groupe Smithfield a much stronger company," he said.

Pedro Ballve, chairman of Campofrio, said that Campofrio and Groupe Smithfield were a strategic fit, with a consolidated position as Europe's leading processed meats company. "This deal significantly enhances our operating platform with complementary manufacturing and marketing, as well as a strong potential for value creation from synergies between the two companies," he said.

"This transaction is an unique opportunity to become the leading player in the packaged meats market, almost three times larger than our closest competitor, with a clear success story supported by leading brands in every market in which we operate," said Robert Sharpe, president and chief executive officer of Groupe Smithfield. "We have the ingredients for a winning combination: Campofrio's know-how in marketing and innovation, as well as its solid position in the branded products segment in Spain along with Groupe Smithfield's expertise in sourcing and productivity and its presence in France," said Mr. Sharpe.

The merger, which is subject to shareholder and regulatory approval, including the grant of a takeover bid exemption by the Spanish securities regulator (CNMV), is expected to close in Smithfield's third fiscal quarter. After the merger Smithfield would continue to account for its investment in Campofrio under the equity method of accounting.

5m Editor