SMITHFIELD, Va., June 30 /PRNewswire-FirstCall/ -- Smithfield Foods, Inc.
(NYSE: SFD) 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.
