In conjunction with its fourth quarter and full-year financial earnings release, meat giantSmithfield Foods Inc ., Smithfield, Va., said it offered to purchase its joint venture partner's 51 percent ownership interest in Butterball LLC, Garner, N.C.
TheWall Street Journalreported that a spokesperson for joint venture partnerMaxwell Farms LLC, Goldsboro, N.C., was not immediately available to comment.
Smithfield said it offered to pay approximately $200 million for the ownership interest as well as the related turkey production assets.
In accordance with Butterball's operating agreement, Maxwell Farms may either accept the offer to sell or be required to purchase Smithfield's 49 percent interest and its related turkey production assets. Smithfield said it expects to conclude the buy/sell decision no later than September 2010 and close before the end of the calendar year.
If Smithfield is the buyer, it will be required to retire Butterball's debt obligations totaling approximately $215 million as of May 2, 2010. Additionally, if Smithfield is the buyer, the company anticipates that a significant amount of capital investment and marketing will be necessary to increase Butterball's earnings potential, officials said.
"Purchasing the remaining ownership interest in Butterball will afford Smithfield the opportunity to build the Butterball brand unconstrained by the restrictive terms of our current investment agreement and disagreements with our partner in respect to the development of the business," noted C. Larry Pope, president and chief executive officer. "On the other hand, if we are the seller, we will have exited the turkey business at a price that we believe fairly values the operations. Either way, we will be pleased with the outcome."
Smithfield Foods makes offer for Butterball
June 17, 2010