Smithfield Foods to Offer $350 Million Convertible Senior Notes Due 2013

SMITHFIELD, Va., June 30 /PRNewswire-FirstCall/ -- Smithfield Foods, Inc. announced today that it intends to offer $350 million aggregate principal amount of its convertible senior notes due 2013 in a registered underwritten public offering. In connection with the offering, Smithfield intends to grant the underwriters a 30-day option to purchase up to $50 million aggregate principal amount of additional convertible notes solely to cover over-allotments, if any.

The notes will be convertible subject to certain conditions into cash or a combination of cash and shares of Smithfield's common stock. The interest rate, conversion rate, offering price and other terms of the convertible notes will be determined by negotiations between the underwriters and Smithfield.

Smithfield expects to use a portion of the proceeds from the offering to fund the net cost of convertible note hedge and warrant transactions that Smithfield expects to enter into with affiliates of certain underwriters of the convertible notes (representing the cost to us of the convertible note hedge transactions, partially offset by the proceeds to us of the warrant transactions). In addition, Smithfield expects to use the proceeds from the offering to pay down one of its short-term credit lines and its U.S. revolving credit agreement. Receipt of net proceeds from the offering would also result in termination of the commitments of the lenders under a bridge facility that Smithfield put in place pending the sale of its beef operations, a transaction it currently expects will close during the second quarter of its fiscal year 2009.

Smithfield intends to enter into privately-negotiated warrant transactions relating to its common stock with the option counterparties, pursuant to which it may be obligated to issue shares of its common stock. The convertible note hedge transactions are expected to reduce the potential dilution to Smithfield's common stock upon any conversion of the convertible notes. However, the warrant transactions could separately have a dilutive effect to the extent that the price of Smithfield's common stock exceeds the applicable strike price of the warrants. If the underwriters exercise their over- allotment option to purchase additional convertible notes, the notional size of the convertible note hedge transactions and warrant transactions will be automatically increased so that they also relate to a number of shares of Smithfield's common stock initially issuable upon conversion of the additional convertible notes.

In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, Smithfield has been advised that the option counterparties and/or their respective affiliates expect to enter into various over-the-counter derivative transactions with respect to its common stock concurrently with or shortly after the pricing of the convertible notes and, shortly after the completion of the underwriters' participation in the distribution of the convertible notes, purchase Smithfield's common stock or other securities, including the convertible notes, in secondary market transactions. These activities could have the effect of increasing or preventing a decline in the price of Smithfield's common stock concurrently with or following the pricing of the convertible notes. In addition, the option counterparties and/or their respective affiliates expect to modify their hedge position following the pricing of the convertible notes from time to time by entering into or unwinding various derivative transactions with respect to Smithfield's common stock and/or by purchasing or selling Smithfield's common stock or other securities, including the convertible notes, in secondary market transactions (and are likely to do so during any observation period related to the conversion of the convertible notes). These activities could have the effect of increasing, preventing a decline in or adversely impacting the value of Smithfield's common stock and/or the value of the convertible notes.

Citi, Goldman, Sachs & Co. and JPMorgan are serving as joint book-running managers for the offering.

The convertible notes offering is being made pursuant to a registration statement filed with the Securities and Exchange Commission and available for review on the SEC's website at http://www.sec.gov/. This press release is neither an offer to sell nor a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The offering of the convertible notes will be made only by means of a prospectus supplement and related prospectus. Copies of the preliminary prospectus supplement and related prospectus for the offering can be obtained from the joint-book running managers for the offering at the following addresses or telephone numbers: