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011111 American Acquisition Makes Smithfield #4 in Beef

November 3, 2001

Smithfield, VA - Smithfield Foods, Inc. announced an agreement in principle to acquire beef packer American Foods Group, Inc. When completed, the company's third beef processing acquisition of the year will thrust the company into the Number Four position in the industry with a nine percent market share.

The agreement calls for Smithfield Foods to acquire 100% of the outstanding capital stock of American Foods. Terms of the transaction were not disclosed. American Foods is the nation's tenth largest beef packer with a daily processing capacity of 1,900 head. With sales of $581 million, the privately-held company produces boxed beef, ground beef and value-added beef products, including case- ready, tray-ready and top-choice beef cuts marketed under premium programs.

Carl Kuehne, owner and chief executive officer of Green Bay-based American Foods said the sale is a positive development for the company's employees and customers. "It was a difficult decision to relinquish ownership of a company that our employees have built into an industry leader over the last 16 years, but I am pleased and excited that this transaction will provide the resources necessary to take the operations to a new level," Mr. Kuehne said.

The acquisition of American Foods establishes Smithfield Foods as a major player in the United States beef industry, with annual sales of $2.6 billion and a processing capacity of 10,425 head of cattle a day. American Foods will become part of the company's newly created beef division, headed by Rich Vesta, chief executive officer of Packerland Holdings, which Smithfield Foods acquired earlier this month. Smithfield Foods made its first beef packing acquisition in June when it purchased Moyer Packing Company.

"We will take advantage of the significant synergies produced by the combination of American Foods, Packerland and Moyer to become a low-cost force in the beef industry," said Joseph W. Luter, III, chairman and chief executive officer. "Shareholders will benefit from this new entry, for we have established this major position in the beef industry at five times EBITDA, which is immediately accretive to earnings," Mr. Luter said.

American Foods aligns well with Smithfield Foods' value-added strategy and expansion into beef. The American Foods and Packerland operations are highly complementary. In addition to its basic beef processing, American Foods is an experienced case-ready beef producer and recently built two new, large case- ready facilities in Green Bay and Cincinnati. Based in Green Bay, Wisconsin, near the Packerland facility, American Foods presents many synergistic opportunities, including marketing, rendering, distribution and transportation.

Mr. Kuehne said these potential synergies convinced him that American Foods' brightest future lie in being part of a large, integrated meat processor. "Smithfield clearly intends to be a major player in the beef industry and I think that means exciting times ahead for the American Foods operations," he said.

In addition to its beef processing operations, American Foods operates a processed pork facility in Mitchell, South Dakota, which makes ham, bacon and other products and has sales of $75 million.

The transaction is expected to close in January.


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