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Smithfield Foods, Inc. Forms Vertically Integrated Pork Processing Joint Venture In Mexico
Smithfield, Virginia, May 12, 1999 - Smithfield Foods, Inc. (NASDAQ:SFDS) today announced that it has entered into a Letter of Intent agreeing in principle to form a joint venture with Jorge Mazon and Fernando Hernandez to own and operate a vertically integrated pork processing business in the State of Sonora, Mexico. Smithfield Foods will invest approximately $24 million for a 50% ownership interest in Agroindustrial Del Noroeste, which will own and operate Grupo Alpro, a fresh and processed meats company with operations in Hermosillo, Guadalâjara and Mexico City, Mexico. The joint venture will also own a hog production company, Agrofarms, which will be the main source of hogs for Grupo Alpro's fresh meat operations. Agroindustrial Del Noroeste will be managed by Jorge Mazon and Fernando Hernandez, who control and operate Grupo Alpro and have been engaged in hog production in Mexico for over 20 years.
Agroindustrial plans to increase the processing capacity of Grupo Alpro's plant in Hermosillo, Mexico to approximately 650,000 hogs annually from its current capacity of 500,000 hogs annually. Jorge Mazon and Fernando Hernandez currently produce approximately 350,000 hogs annually. Agrofarms plans to increase this to as many as 600,000 hogs annually. Grupo Alpro, which produces a variety of products for domestic consumption in Mexico and for export to the Asian Rim, plans to broaden its line of retail and foodservice items and penetrate new markets in Mexico as well as the United States. At present, Grupo Alpro is the largest federally inspected hog processor in Mexico and is U.S.D.A. certified for export to the U.S.
"This alliance with a well-established and well-run pork processor in Mexico is another step in Smithfield Foods strategic plan to become a global pork processor by acquiring or forming alliances with companies whose products, facilities, and cost structures give them significant operating and marketing advantages," Joseph W. Luter, III, Chairman and Chief Executive Officer of Smithfield Foods, Inc., stated. Luter said that Mexico, and especially the State of Sonora, with its proximity to U.S. markets in California, Arizona and Texas, its relatively stable political and economic systems, and highly-skilled, efficient work force, is a highly desirable foreign market to invest in at this time.
"We are very pleased to become associated with well-respected investors and managers like Jorge Mazon and Fernando Hernandez in Mexico and believe that this partnership will be highly successful and rewarding for all parties in the future," Luter said.
Smithfield Foods is the largest vertically integrated producer and marketer of fresh pork and processed meats in the United States. The Company's brands include Smithfield Lean Generation Pork, Smithfield Premium, Gwaltney, John Morrell, Patrick Cudahy, Lykes, Esskay, Kretschmar Valleydale, Jamestown, Dinner Bell, Realean, Patrick's Pride, Great, Tobin's First Prize, Peyton's, Curly's, Ember Farms and others.
This news release may contain "forward-looking" information within the meaning of the federal securities laws. The forward-looking information may include 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 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. The risks and uncertainties include availability and prices of live hogs and raw materials, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital and actions of domestic and foreign governments.