Maple Leaf Foods Inc. has agreed to acquire Smithfield Foods Inc.'s Schneider Corp. unit for US$378 million, or about C$515 million, including the assumption of debt. \r\n\r\nIn a news release, Maple Leaf said the deal is seen closing by year-end or early 2004, subject to normal conditions, including obtaining clearance for the transaction from the Canadian Competition Bureau. \r\n\r\nSchneider, Kitchener, Ontario, is one of Canada's largest producers of premium-branded food products, specializing in packaged processed meats, poultry and grocery products. It employs about 5,000 people at 20 facilities, Maple Leaf noted. \r\n\r\nIn the fiscal year ended April 27, Schneiders generated sales of C$1.24 billion and earnings from operations of C$54.1 million. \r\n\r\nMaple Leaf Foods Inc. said that, upon closing, a Merger Leadership Council will be established, including equal representation from both companies, ""to identify opportunities to enhance business performance and unite the two companies."" \r\n\r\nIt said it will fund the transaction with debt. Over the next several months, the company will consider issuing C$100 million to C$200 million of treasury shares as part of a longer-term financing plan. \r\n\r\nOntario Teachers' Pension Plan Board (X.OTP) has provided Maple Leaf with a standby commitment to purchase, at Maple Leaf's option, up to C$150 million of treasury shares within 12 months of closing. Pricing of shares under this arrangement would be at a 6% discount to the market price of Maple Leaf common shares before an issue. \r\n\r\nMaple Leaf noted that, if it decides to issue treasury shares, it would favor issuing shares into the broader market. \r\n\r\nSeparately, Smithfield Foods Inc. confirmed the agreement to sell its Canadian unit. Smithfield chairman and chief executive Joseph W. Luter said: ""Schneider has been a terrific business for Smithfield, having consistently contributed to our results. However, it is an even better business for Maple Leaf, due to the many synergies between the two companies...This sale is an attractive opportunity for Smithfield, and we believe that we are receiving full value for these assets. We remain strongly committed to our strategy of opportunistic food industry transactions, both domestically and internationally."" \r\n\r\nMaple Leaf is a major Canada-based food-processing company. It employs about 18,000 people and reported sales of C$5.1 billion in 2002. \r\n\r\nA spokeswoman for Smithfield Foods Inc. (SFD) said the US$378 million purchase price that Maple Leaf Foods Inc. is paying for Schneider Corp. includes the assumption of US$75 million of debt. A spokeswoman for Maple Leaf Foods Inc. declined to comment on the amount of Schneider Corp. debt being assumed as part of the transaction. \r\n\r\nDow Jones Newswire/Carolyn King
