SMITHFIELD, Va. — Smithfield Foods Inc., the largest global hog producer and pork processor, said Monday it agreed to acquire most assets of the branded meats business of ConAgra Foods Inc. for about $575 million in cash and stock.
Brands being acquired include Armour, Butterball, Eckrich, Margherita, Longmont and LunchMakers, which are marketed to grocers, delis and restaurants. The brands have combined sales of about $1.8 billion.
Smithfield spokesman Jerry Hostetter said the acquisition will firm up the company's presence in the lucrative packaged-meats business.
"It's very profitable, and it's another source to use our own raw materials from pork processing," he said.
Smithfield's operations in Utah include Smithfield BioEnergy in Beaver County, Murphy-Brown LLC (Circle Four Farms) in Milford and Farmland Foods Inc. case-ready meats plant in Salt Lake City. A spokesperson for ConAgra said none of that company's operations in Utah would be affected by the deal announced Monday.
About $325 million of the purchase price will be allocated to Carolina Turkeys, a joint venture between Smithfield and Maxwell Farms Inc., which will operate ConAgra's Butterball Turkey business, which has annual sales of $600 million.
The remaining $250 million of the purchase price includes $150 million in cash and $100 million in Smithfield common stock.
While the brands sold have been profitable, they no longer fit into ConAgra's long-term product plan, said spokeswoman Tania Graves.
"ConAgra's main focus is consumer packaged goods," Graves said. "These businesses do not have the margins that approach some of our other businesses and they're not a strategic fit."
ConAgra said the deal allows the company to simplify its operations and focus on other areas of its portfolio, strengthening successful brands like Healthy Choice and Banquet frozen meals.
Proceeds from the sale could be used for reducing debt and repurchasing shares, among other uses, ConAgra said. Graves would not discuss the company's debt load.
The deal is expected to close during Smithfield's second fiscal quarter, ending Oct. 30.
Smithfield Foods shares fell 24 cents to close at $28.45, while ConAgra shares fell 24 cents, or 1.1 percent, to finish at $21.50 on the New York Stock Exchange.
Dick Bond, president of competing Tyson Foods Inc., showed little concern with the announcement.
Tyson, the world's largest poultry processor, on Monday reported a wider-than-expected loss in the third quarter.
"We probably didn't look at it in an in-depth way, primarily because basically most of the brands seemingly were on a decline and most of the assets, at least in our opinion, hadn't had a whole lot of money put in them in recent years," he said during a Monday morning conference call.