SMITHFIELD, Va., July 1, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- 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 firstname.lastname@example.org 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.
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