SMITHFIELD, Va., and OMAHA -- Smithfield Foods Inc. and ConAgra Foods Inc. both announced today the signing of a definitive agreement for Smithfield to acquire substantially all of the assets of ConAgra's branded meats business for $575 million.

Under the agreement, ConAgra Foods will receive $475 million in cash, subject to adjustments in working capital, and $100 million in Smithfield Foods stock not subject to any sale restrictions, less transaction costs.

The business includes the packaged meats and turkey products sold under the Armour, Butterball, Eckrich, Margherita, Longmont and LunchMakers brands. The brands are marketed to retail grocers, delis, restaurants and other foodservice establishments. The combined annual sales of the businesses are about $1.8 billion.

"This acquisition furthers our strategy of growing the packaged meats side of our business with higher-value, further-processed and pre-cooked products," said C. Larry Pope, president and COO of Smithfield Foods. "In addition, this continues our previously announced strategy of utilizing our superior raw materials internally as opposed to selling in the commodity market. These brands will allow us to capture sales and marketing opportunities and more fully serve the needs of our retail and foodservice customers."

Smithfield intends to separate the Butterball turkey business from the non-turkey packaged meats business and acquire and operate the Butterball turkey business through Carolina Turkeys, an existing partnership between Smithfield Foods and Maxwell Farms, Inc. Smithfield owns 49 percent of Carolina Turkeys, the fourth largest turkey producer in the United States.

Smithfield said that $325 million of the purchase price will be allocated to the Carolina Turkeys joint venture with the remaining $250 million purchase price paid with $100 million in Smithfield Foods common stock and $150 million in cash. Sales of the turkey operations are about $600 million, while the remaining branded meats businesses are about $1.2 billion.

ConAgra to keep some brands

"This sale is a significant milestone for ConAgra Foods, and part of an ongoing process to simplify our operations and to focus our efforts on areas of our portfolio where we have the greatest opportunities," said Gary Rodkin, ConAgra Foods president and CEO. "It is a key catalyst in our plans and allows rapid progress on cost initiatives needed to fuel our future growth."

Proceeds from this and other previously announced divestitures could be used for a number of alternatives, including reducing debt and repurchasing shares, ConAgra said.

Consistent with plans announced in February concerning the sale, ConAgra confirmed that it will retain the Hebrew National brand and products, Brown 'N Serve frozen sausage, as well as its Slim Jim and Pemmican meat snacks because of their strong brand equities, fit and growth potential within the company's overall portfolio.

The transaction is subject to Hart-Scott-Rodino antitrust clearance and other customary closing conditions. Smithfield expects to complete the transaction during its fiscal second quarter which ends October 30, 2006.

With sales of $11 billion, Smithfield is a leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs.

ConAgra Foods Inc. is one of North America's largest packaged food companies, serving consumer grocery retailers, as well as restaurants and other foodservice establishments.

SOURCE: News releases from Smithfield Foods Inc. (PR Newswire) and ConAgra Foods Inc. (Business Wire).