Virginia's two largest meat-packing companies merged yesterday and announced plans to move their combined corporate headquarters to metropolitan Washington.

Smithfield Foods Inc. purchased the Gwaltney meat-packing and processing division of International Telephone & Telegraph Corp., creating the largest pork processor firm in the Eastern U.S. with annual revenues of more than $400 million.

Although an exact purchase price was not disclosed, Smithfield apparently paid at least $27.5 million and assumed an undisclosed amount of Gwaltney debts in the deal with ITT's Continental Baking Co. subsidiary.

Smithfield Chairman and President Joseph Luter III said the purchase price will be financed through a combination of $15 million in secured bank loans, the issuance of $9 million of convertible subordinated notes (which may be converted into Smithfield common stock at $6 a share), about $3.5 million of bank borrowings under a new line of credit and assumption of certain Gwaltney-ITT liabilities.

Luter said further that Smithfield Foods will move its headquarters to an unspecified location in Rosslyn, early in 1982. Both Smithfield Foods and Gwaltney currently are based in Smithfield, where separate meat-packing plants will be maintained.

The relocation to Northern Virginia of the corporate staff is planned so the headquarters offices are not physically affiliated with either of the subsidiaries, which have a history of keen business battles. "Smithfield Packing Co. and Gwaltney of Smithfield Ltd. will compete head-to-head as they have for the past 45 years," Luter declared. "Both companies are successful and growing, so we're not going to change a profitable situation."

Smithfield and Gwaltney have similar product lines and Luter emphasized that two separate brand names are being preserved because of Smithfield's goal to retain a combined market share despite the merger. Each subsidiary will have its own president, board of directors and sales staff to foster competition within the firm.

Last year, Smithfield reported sales of $218 million, while ITT reported Gwaltney sales at $197 million. The merged firm has 3,500 employes at plants in Smithfield, Norfolk, Suffolk and Portsmouth, Va.; and Kinston and Salisbury, N.C.