Pork producer Smithfield Foods said Friday it will sell its 49 per cent stake in turkey producer Butterball to its joint venture partner for about US$175 million.
Smithfield and Maxwell Farms have jointly owned the Butterball brand since 2006. The sale should be completed by the end of the year and Smithfield said it will use the proceeds to pay down debt.
Maxwell Farms will then sell half of Butterball to agriculture company Seaboard Corp. Seaboard said Sept. 9 it had reached a deal to buy 50 per cent of Butterball in partnership with Maxwell Farms.
“We are pleased to be partnering with Seaboard and moving forward as the buyer of Butterball, the strongest brand in the turkey industry,” Walter Pelletier, president of Maxwell Farms, said Sept. 9.
Smithfield Foods said earlier last week it would likely sell its 49 per cent stake in the joint venture, after it unsuccessfully tried to buy the remaining 51 per cent for about US$200 million.
“As previously stated, our minority ownership position in Butterball did not permit us to execute the growth strategy that we believe was necessary to fully develop the company to its potential. Accordingly, we are exiting the business, and will use the sale proceeds to further delever our balance sheet,” Smithfield CEO Larry Pope said Friday.
“While largely expected, we believe that the sale of the Butterball turkey business would be a positive catalyst for Smithfield shares. Turkey is a non-core business for Smi thf ield,” Stephens Inc. analyst Farha Aslam said before Smithfield’s announcement.