Smithfield Acquires Murphy; AFBF Worries

September 3, 1999

Smithfield Foods, Inc., has agreed to acquire all the capital stock of Murphy Farms, Inc., and its affiliates. Murphy is the second largest hog producing company in the country with some 325,000 sows and 5.5 million market hogs a year. American Farm Bureau Federation worries the deal "fuels the growing concern of concentration" in agriculture.

Estimates are that the deal is worth $459.7 million in stock and assumed debt and other liabilities of about $170 million. The deal should be finalized by Jan. 1. Smithfield believes the hog industry will continue to consolidate and intends to be part of that trend.

Murphy is located in Rose Hill, NC. Smithfield, located in Smithfield, VA, is the nation's largest hog producer and raises hogs in North and South Carolina, Colorado, Virginia and Utah. Carroll's Foods, Inc., a Smithfield subsidiary, raises hogs in Brazil and Mexico. The acquisition just about doubles Smithfield's hog production capacity.

"Murphy Family Farms has been a long-term supplier of quality hogs to Smithfield Foods, and we will be delighted to have them join the Smithfield family of companies," said Joseph W. Luter, III, chairman and CEO of Smithfield. "While this transaction will temporarily take us above our stated goal of 30-40% vertical integration, it was too good an opportunity to let pass given the value of the assets and the current political and environmental barriers to further internal expansion. We expect the industry to continue consolidating, and Smithfield Foods will continue to lead that consolidation."

The acquisition "could impact market opportunities for producers across the United States," says AFBF President Dean Kleckner.He promised to ask the Justice Department for a review of the deal. "All major mergers, such as this one, must be reviewed by the Justice Department," Kleckner says. "The time has come for the Justice Department to have someone with agricultural expertise to oversee such concentration issues...to ensure antitrust laws are not being violated and that opportunities for all farmers are protected."

Low commodity prices "played a major role in (Murphy's) decision to sell" the 37-year-old operation, Kleckner continues. "It also clearly illustrates how dire the economic situation is for smaller family farms."