In a move to become one of the major U.S. pork companies, Smithfield Foods Inc., the largest East Coast producer of ham, bacon, sausages and hot dogs, announced yesterday that it plans to acquire a Wisconsin pork company for about $29 million.
Arlington-based Smithfield has agreed to acquire Patrick Cudahy Inc., a Cudahy, Wis., company that processes and packs pork products under the Patrick Cudahy and Agar brand names.
The acquisition will increase Smithfield Foods' sales base by adding canned hams and dry sausage products to the company's branded processed meat lines, said Joseph W. Luter III, chairman and president of Smithfield Foods.
"Combined annual sales of Smithfield Foods should now exceed $800 million, which will make the company one of the major pork packers and processors in the United States," Luter added.
Company officials at Patrick Cudahy, a subsidiary of Prestige Foods Inc., declined to comment on the acquisition.
"This acquisition will take Smithfield away from being just a regional, East Coast processor, and will put them in the Midwest where you see a concentration of pork processors," said Kenneth M. Gassman Jr., a financial analyst with Wheat First Securities Inc. "It will set them up to be a national pork processor."
Smithfield products are sold under many brand names, including Smithfield, Luter, Jamestown, Gwaltney, Williamsburg, Hancock's Old Fashioned Country Ham and Olde Smithfield. Its major competitors include Wilson Foods Corp., Oscar Mayer, Swift & Co. and George A. Hormel & Co., a company spokesman said.
Smithfield reported profits of $2.4 million on sales of $541.6 million for its last fiscal year ending April 29. The company's profit for the second quarter ending Oct. 28 was $1.5 million on sales of $146.2 million. Although Patrick Cudahy had revenue of approximately $250 million in the last year, the company would not disclose its net income. Smithfield Foods officials said the Wisconsin company was not profitable.
The Wisconsin company will become a new subsidiary of Smithfield Foods, called Patrick Cudahy Ltd., which will remain at its present location. Smithfield will own 80 percent of the firm, and Alan T. Anderson, who will become president of the new subsidiary, will own the remaining 20 percent interest.
Anderson, previously chairman and president of Bluebird Inc. (now Prestige Foods Inc.), left that company last year. He was president of Patrick Cudahy, Bluebird's largest subsidiary, from 1974 to 1979. Before joining Patrick Cudahy, Anderson was vice president of Smithfield Packing Co., a wholly owned subsidiary of Smithfield Foods.
The acquisition will be financed with short-term bank borrowings, $5 million of long-term notes and the assumption of approximately $6 million of current liabilities.
Smithfield is still awaiting approval of the transaction by the Federal Trade Commission and the Justice Department, company officials said.