On October 28, 2003 Smithfield Foods, Inc. completed the acquisition of substantially all of the pork assets of Farmland Foods. Smithfield was the successful bidder at an auction held October 12 under auction and bid procedures approved by the Bankruptcy Court. The purchase price for the Farmland Foods business was $367.4 million in cash, plus the assumption of certain Farmland liabilities, and is subject to post-closing adjustments for certain working capital items. The assumed liabilities include the pension obligations and associated assets of both Farmland Foods and Farmland Industries, with Smithfield’s agreement to assume such pension obligations valued at $90 million in the auction by the debtor.

Farmland Foods, based in Kansas City, Missouri, operates packing plants in Crete, Nebraska, Dennison, Iowa and Monmouth, Illinois with a total capacity of 28,600 hogs a day or 7.5 million per year. These plants produce fresh sausage, bacon and processed hams, as well as fresh pork. In addition, Farmland operates six processing plants in Carroll, Iowa; Omaha, Nebraska; Salt Lake City, Utah; New Riegel, Ohio; Springfield, Massachusetts and Wichita, Kansas where they produce cooked hams, spiral hams, sausage and case-ready fresh pork.

“This is a great day for all Farmland constituencies,” said C. Larry Pope, president and chief operating officer of Smithfield Foods on the day of completing the transaction. “This transaction provides Farmland’s independent producers, employees, customers, pensioners, suppliers and communities with the comfort of knowing that Farmland Foods is financially sound. With Smithfield’s support and leadership, Farmland Foods will succeed and continue to sustain the Midwestern communities which depend on it.”

“We are truly excited about joining the Smithfield Foods family of companies,” said George H. Richter, president of Farmland Foods. “Importantly, our employees’ morale has remained high through this period of uncertainty. Our customers have been loyal and our relationship with them remains healthy. All of us at Farmland Foods are eager to become part of this dynamic Smithfield organization and work together to grow our business,” he said.

Mr. Pope said that the transaction will benefit Smithfield shareholders, for it is expected to be immediately accretive to earnings before the impact of cost savings and synergies. “Farmland Foods has a talented management team, a well-respected brand name and efficient pork processing operations with a substantial value-added processed meats business. They bring new product and distribution opportunities to Smithfield to better serve our customers. This is a transaction that will continue to build shareholder value over time,” he said.

With the acquisition of Farmland, Smithfield Foods annualized sales will approach $10 billion, which is almost double the revenue of fiscal year 2000. Smithfield’s market share in pork processing is now 27 percent. The addition of Farmland Foods to the Smithfield Foods family of companies will significantly strengthen Smithfield’s presence in the Midwest communities where Farmland facilities are located. Through its community relations outreach, Smithfield’s strong presence will be known throughout the Farmland communities.

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