US-based pork processor Smithfield Foods has entered into an agreement to form 50/50 joint venture with Kansas City Sausage, including its sister company, Pine Ridge Farms, as a part of its plan to strengthen its packaged meats business.
Smithfield Foods noted that the deal will drive the company's growth in two key packaged meat categories - breakfast sausage and dinner sausage, which are estimated to be worth $4bn in retail and foodservice sales annually. The deal will enable also it to expand the product offerings to customers, the company said.
Smithfield president and chief executive officer C Larry Pope said that Kansas City Sausage is one of the its largest live sow customers, and this joint venture will enable the company to move raw material up the value chain from commodity live sows to branded packaged meats.
"We will merge Kansas City Sausage's low-cost, efficient operations and high-quality products with Smithfield's strong brands and sales and marketing team to continue to grow our packaged meats business," he said.
"This combination should allow us to fill existing plant capacity and dramatically increase the joint venture's sales in a relatively short period of time," Pope added.
Smithfield plans to fund the transaction with cash on hand and expects to close the deal in the fourth quarter of fiscal 2013, subject to customary closing conditions, including regulatory approvals. Financial terms of the joint venture were not disclosed. Smithfield expects the transaction to be immediately accretive to earnings.
Kansas City Sausage, which has sales of approximately $200m, is a leading US sausage producer and sow processor. The company has operations in Des Moines, Iowa and Kansas City, Missouri.
