Pork producer Smithfield to sell its 49 percent stake in top-selling turkey brand Butterball

Smithfield to sell its half of Butterball

RICHMOND, Va. — Pork producer Smithfield Foods is selling its stake in the Butterball turkey joint venture, becoming a pure-play pork producer as it continues focusing on its more profitable packaged meat business.

Butterball, a major name in the turkey world, annually sells 1 billion pounds of turkey — 20 percent of all turkeys produced in the U.S.

Smithfield said Friday that its partner, Maxwell Farms, will buy the company’s 49 percent interest for about $175 million and then sell a 50 percent stake in the venture to Seaboard Corp. for $177.5 million in cash, according to a filing with the Securities and Exchange Commission.

“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,” Chief Executive C. Larry Pope said.

Smithfield, the nation’s largest pork producer, said it will use the estimated proceeds of $175 million to reduce its debt. The deal is expected to close by year’s end.

Shares of Smithfield Foods Inc., based in Smithfield, Va., dipped 10 cents to $16.83.

Smithfield said in June that it wanted either to take control of Butterball LLC or to cash out of the venture. Pope said then that Smithfield had long wanted Maxwell Farms to invest more in Butterball to upgrade its facilities, business and marketing.

Smithfield offered Maxwell Farms $200 million for its 51 percent stake and set a September deadline for Maxwell Farms to decided whether to sell or to buy out Smithfield.

Smithfield has been trying to make its packaged bacon, ham and other products a household name, like the products of competitors Tyson and Hormel. It has also been trying to lessen its emphasis on processing hogs, a business that is more closely tied to volatile ingredient costs and price shifts.

The company’s packaged meat business, with brands such as Ekrich and Patrick Cudahy, also is more profitable.

Smithfield has been cutting jobs and closing factories, including one in its hometown, for more than a year to focus more on packaged meat.

It has also been shedding its beef assets, so the sale of Butterball fits into that strategy.

“Strategically, either you get larger and get 100 percent focused on the businesses you’re in, or you exit them,” KeyBanc Capital Markets analyst Akshay S. Jagdale said in an interview with The Associated Press. “Now they are a pure-play pork company. There’s really nothing else there.”

Maxwell Farms and Butterball are based in North Carolina. Butterball has 5,500 employees at its seven plants and headquarters. Its 675,000-square-foot facility in Mt. Olive, N.C., is the world’s largest turkey plant.

Turkey was the No. 4 protein choice for American consumers last year, with the average person eating 16.9 pounds in 2009, according to the National Turkey Federation. The Thanksgiving meal staple hasn’t recovered from the weak consumer demand as well as other meats because people don’t consume enough of it and producers can’t spread their costs over steeper production.

AP Retail Writer Emily Fredrix in New York contributed to this report.