SMITHFIELD, Va., July 1 /PRNewswire-FirstCall/ -- Smithfield Foods, Inc.
(NYSE: SFD) announced today the pricing of its $350 million aggregate
principal amount convertible senior notes due 2013 through a registered
underwritten public offering. In connection with the offering, Smithfield
granted the underwriters a 30-day option to purchase up to $50 million
aggregate principal amount of additional convertible notes solely to cover
over-allotments, if any. The closing of the offering is expected to occur on
July 8, 2008, subject to customary closing conditions.
The senior unsecured notes will bear interest at a rate of 4.00% per year,
payable semi-annually in arrears, beginning on December 30, 2008.
The notes will be convertible subject to certain conditions into cash or a
combination of cash and shares of Smithfield's common stock, at an initial
conversion rate of 44.0820 shares of common stock per $1,000 principal amount
of the notes. The conversion rate is subject to adjustment in certain
circumstances. The initial conversion rate represents an initial conversion
price of approximately $22.68 per share, or a conversion premium of
approximately 30% to the closing price of Smithfield's common stock on July 1,
2008, which was $17.45 per share.
Smithfield may not redeem the Notes prior to their maturity. Holders of
the notes may require Smithfield to purchase all or a portion of their notes,
in cash, upon the occurrence of certain fundamental changes involving
Smithfield.
Smithfield estimates that the net proceeds of this offering will be
approximately $338.6 million (or approximately $387.3 million if the
underwriters' over-allotment option is exercised in full), after deducting the
underwriting discounts and commissions and estimated offering expenses.
Smithfield expects to use approximately $45.1 million of the proceeds from the
offering to fund the net cost of convertible note hedge and warrant
transactions that Smithfield expects to enter into with affiliates of certain
underwriters of the convertible notes (representing the cost of the
convertible note hedge transactions, partially offset by the proceeds of the
warrant transactions). In addition, Smithfield expects to use the net
proceeds from the offering to pay down $100 million of one of its short-term
credit lines and to use the balance to reduce amounts outstanding under its
U.S. revolving credit agreement. Receipt of net proceeds from the offering
would also result in termination of the commitments of the lenders under a
bridge facility that Smithfield put in place pending the sale of its beef
operations, a transaction it currently expects will close during the second
quarter of its fiscal year 2009.
Smithfield intends to enter into privately-negotiated warrant transactions
relating to its common stock with the option counterparties, pursuant to which
it may be obligated to issue shares of its common stock. Pursuant to the
convertible note hedge and warrant transactions, Smithfield has entered into
convertible note hedge transactions with a strike price equal to the initial
conversion price of the convertible notes and warrant transactions with a
strike price of $30.54 per share, which is 75% higher than the closing price
of Smithfield's common stock on the NYSE on July 1, 2008. The convertible note
hedge transactions are expected to reduce the potential dilution to
Smithfield's common stock upon any conversion of the convertible notes.
However, the warrant transactions could separately have a dilutive effect to
the extent that the price of Smithfield's common stock exceeds the applicable
strike price of the warrants. If the underwriters exercise their over-
allotment option to purchase additional convertible notes, the notional size
of the convertible note hedge transactions and warrant transactions will be
automatically increased so that they also relate to a number of shares of
Smithfield's common stock initially issuable upon conversion of the additional
convertible notes.
In connection with establishing their initial hedge of these convertible
note hedge and warrant transactions, Smithfield has been advised that the
option counterparties and/or their respective affiliates expect to enter into
various over-the-counter derivative transactions with respect to its common
stock concurrently with or shortly after the pricing of the convertible notes
and, shortly after the completion of the underwriters' participation in the
distribution of the convertible notes, purchase Smithfield's common stock or
other securities, including the convertible notes, in secondary market
transactions. These activities could have the effect of increasing or
preventing a decline in the price of Smithfield's common stock concurrently
with or following the pricing of the convertible notes. In addition, the
option counterparties and/or their respective affiliates expect to modify
their hedge position following the pricing of the convertible notes from time
to time by entering into or unwinding various derivative transactions with
respect to Smithfield's common stock and/or by purchasing or selling
Smithfield's common stock or other securities, including the convertible
notes, in secondary market transactions (and are likely to do so during any
observation period related to the conversion of the convertible notes). These
activities could have the effect of increasing, preventing a decline in or
adversely impacting the value of Smithfield's common stock and/or the value of
the convertible notes.
Citi, Goldman, Sachs & Co., and JPMorgan are serving as joint book-running
managers for the offering.
The convertible notes offering was made pursuant to a registration
statement filed by Smithfield with the Securities and Exchange Commission and
available for review on the SEC's website at www.sec.gov. This press release
is neither an offer to sell nor a solicitation of an offer to buy the
securities described herein, nor shall there be any sale of these securities
in any jurisdiction in which such an offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such jurisdiction. The offering of the convertible notes will be made
only by means of a prospectus supplement and related prospectus. Copies of
the prospectus supplement and related prospectus for the offering, when
available, can be obtained from the joint-book running managers at the
following addresses or telephone numbers: Citi: Citi-Brooklyn Army Terminal,
140 58th St. 8th Fl., Brooklyn, NY 11220,
(800) 831-9146
Goldman, Sachs & Co.: Prospectus Department, 85 Broad Street, New York, New
York 10004, fax 212-902-9316 or email prospectus-ny@ny.email.gs.com
JPMorgan: Prospectus Library, 4 Chase Metrotech Center, CS Level, Brooklyn, NY
11245, (718) 242-8002
With sales of $11 billion, Smithfield Foods is the leading processor and
marketer of fresh pork and packaged meats in the United States, as well as the
largest producer of hogs.
This news release contains "forward-looking" statements within the meaning
of the federal securities laws. The forward-looking statements includes
statements concerning the Company's outlook for the future, as well as other
statements of beliefs, future plans and strategies or anticipated events, and
similar expressions concerning matters that are not historical facts. The
Company's forward-looking information and statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, the statements. These risks and uncertainties
include the availability and prices of live hogs and cattle, raw materials,
fuel and supplies, food safety, livestock disease, live hog production costs,
product pricing, the competitive environment and related market conditions,
hedging risk, operating efficiencies, changes in interest rate and foreign
currency exchange rates, access to capital, the investment performance of the
Company's pension plan assets and the availability of legislative funding
relief, the cost of compliance with environmental and health standards,
adverse results from on-going litigation, actions of domestic and foreign
governments, labor relations issues, credit exposure to large customers, the
ability to make effective acquisition, disposition, merger and joint venture
transactions and successfully integrate newly acquired businesses into
existing operations and other risks and uncertainties described under the
caption "Risk Factors" in the prospectus supplement and related prospectus.
Readers are cautioned not to place undue reliance on forward-looking
statements because actual results may differ materially from those expressed
in, or implied by, the statements. Any forward-looking statement that the
Company makes speaks only as of the date of such statement, and the Company
undertakes no obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise. Comparisons of
results for current and any prior periods are not intended to express any
future trends or indications of future performance, unless expressed as such,
and should only be viewed as historical data.
SOURCE Smithfield Foods, Inc.
Jerry Hostetter of Smithfield Foods, Inc., +1-212-758-2100,
jerryhostetter@smithfieldfoods.com
