Smithfield stock drops on deal announcement
- July 2, 2008
Smithfield Foods Inc. plans to sell a 4.95 percent stake in the company to COFCO Ltd., an agricultural trading company controlled by the Chinese government.
The Wall Street Journal reported Wednesday that fear that the deal would dilute the value of investors’ holdings prompted Smithfield’s stock to drop $2.43 Tuesday to $17.45, a five-year low.
COFCO is buying 7 million Smithfield shares. The Chinese company’s chairman, Gaoning Ning, will be nominated to serve on Smithfield’s board. The Virginia company plans to use proceeds from the deal to repay debt and for general corporate purchases.
Smithfield also said Tuesday that it will sell its main European subsidiary, Groupe Smithfield Holdings SL, to Campofrio Allimentacion SA, a Spanish processed-meats company. Smithfield owns 24 percent of Campofrio’s stock and will own 36 percent of the combined company resulting from the transaction.
Smithfield reported last month that fourth-quarter earnings were down 94 percent from the year before.