Smithfield CEO C. Larry Pope said on June 16 that the company “would be interested and routinely look at potential opportunities to do something particularly on the packaged-meats side.” With earnings projected to fall this year and the highest debt-to-equity ratio of the biggest U.S. meat companies, Smithfield could pursue smaller deals in faster growing economies, said AgStar’s Mark Greenwood.
Smithfield is “trying to increase value by adding value to their brand,” Greenwood told Bloomberg. “They might look more international than domestic, especially because of the emerging markets,” he said. “If they could get something like that pulled off, you think that it would work to their benefit.”
Sara Lee’s North American retail meats business had $2.9 billion in sales in the past 12 months and had an operating margin of 9.7 percent, data compiled by Bloomberg show. That’s higher than Smithfield, which generated 7.6 cents in operating income per dollar of sales, the data show. If acquired, Sara Lee’s meats unit would increase sales at Smithfield’s packaged meats business by about 50 percent, data compiled by Bloomberg show. Smithfield had acquired Sara Lee’s European meats business in 2006.
People’s Food Holdings is a meat processor valued at approximately $721 million. The company’s sales have increased 54 percent over the last three years.
Bloomberg has listed Tyson Foods as an acquisition target based on the company’s successful operations, but noted that Tyson’s size would make it difficult for Smithfield to acquire without penalizing its own shareholders.