Smithfield Foods Inc., the world's biggest hog and pork producer, plans to expand its beef business in the United States, probably by acquiring a rival, Chief Executive Joseph W. Luter III said Tuesday.
The Smithfield, Va.-based meat company, already the fifth-largest U.S. beef producer, will get "dramatically bigger" in that business, Luter told analysts and investors at a conference in Scottsdale, Ariz. "We have an opportunity to make a major acquisition in this country."
Luter, 65, has been expanding Smithfield's beef production during the past four years to reduce the company's reliance on the pork business and to compete with Tyson Foods Inc., a poultry producer that acquired IBP Inc. in 2001 to become the world's largest beef company.
Possible targets for Smithfield may be Greeley, Colo.-based Swift & Co., the third-largest U.S. beef processor, and Kansas City, Mo.-based National Beef Packing Co., which is No. 4, BB&T Capital Markets analyst Andrew Wolf said.
Wolf rates Smithfield shares a "buy" and doesn't own them.
Luter didn't name any companies that Smithfield would consider. Spokesman Jerry Hostetter said that the company would be interested in acquiring Swift "if the company were for sale."
Smithfield last week agreed to merge its cattle-feedlot business into a joint venture with ContiGroup Cos. to create the largest U.S. supplier of livestock to beef producers. The feedlots will supply about 80 percent of the cattle slaughtered by Swift, with the rest going to National Beef.
Tyson reduced output at five plants last month after losses in the quarter that ended Jan. 1. Swift and National Beef also have reduced beef production.
Luter expanded Smithfield's production in 2003, when the company acquired the money-losing pork business from bankrupt Farmland Industries for $367.4 million.
"I like getting into businesses when other people don't like it," Luter said. "We're not going to pass up any opportunity."
Last week, Smithfield said its third-quarter profit nearly doubled on strong pork demand and higher hog prices.
"If I had thought we had peaked and I would just be running what we had (acquired), I would have retired," Luter said. The chief executive said he plans to hand off more of the day-to-day operations and concentrate on "thinking about strategic acquisitions."
Luter said Smithfield is "not enthusiastic" about acquiring the $1 billion European meat businesses of Sara Lee Corp., which said earlier this month that it planned to sell the unit this year.
Lower labor and grain costs in eastern Europe are more attractive to Smithfield's potential expansion plans than the Sara Lee assets, Luter said.
Smithfield in November bought meat processors in Poland and Romania for a combined $83 million to expand into eastern Europe.
In June, Smithfield bought Jean Caby of France for $33.2 million. "We are going to make history in Romania," Luter said.
Shares of Smithfield fell 38 cents, or 1.1 percent, to $32.98 in New York Stock Exchange composite trading. The stock has gained 32 percent in the past year.Omaha World Herald
