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Dive Overview:
Smithfield Foods on Tuesday spun off its European operations in preparation for a U.S. initial public offering.
The country's largest pork producer said the decision would further accelerate “unique growth opportunities for both businesses.” Smithfield Europe will be renamed Molliny Foods and will remain a subsidiary of China-based WH Group, according to the announcement.
Smithfield Chief Executive Shane Smith said the “time is right” to separate the businesses as WH Group considers listing its Mexico and U.S. pork operations as a single company on the U.S. stock exchange.
Dive Insights:
After a tough market environment that has weighed on Smithfield and other meat processors, things are starting to improve as lower feed prices boost profits and generate cash flow for operational changes and strategies.
WH Group notified investors in mid-July of a proposal to separate Smithfield's U.S. and Mexican operations and list them as a separate company on the New York Stock Exchange or Nasdaq stock market.
If the deal goes through, Smithfield will remain a subsidiary of WH Group and its earnings will continue to be integrated with the parent company's other financial results, according to investor filings.
The listing proposal has yet to be finalized and must undergo regulatory and board review before being approved, but Smithfield appears to be conducting due diligence ahead of a potential IPO by separating its European operations from its North American assets.
“The time is right to establish our North American and European businesses as independent businesses that can execute their own strategies that respond to different market environments and opportunities,” Smith said in a statement. “Doing so will improve decision-making agility for our respective management teams and optimize the performance and outlook of each business.”
Smithfield and other meat processors have responded to market fluctuations by focusing on expanding higher-margin, value-added products while improving their cost structures and commodity exposure in their fresh-meat businesses.
The spinoff of Smithfield's European operations will allow the companies to focus more on region-specific strategies to drive growth. Smithfield said the European market is generally more fragmented than North America and is exhibiting different dynamics.
Moligny operates in Poland, Romania, Slovakia, Hungary, Spain and the UK, supplying fresh pork and packaged meat across the continent.
“Our strategy of being a more agile competitor with a focus on the European food market will benefit us,” Mauriney Foods CEO Louis Cerdon said in a statement. “We are confident that this move will accelerate growth opportunities for our company and its employees.”
