In The News
September 26, 2007


Wall Street Journal
Smithfield Stockholder Shows Faith by Buying More Shares
By NICOLAS BRULLIARD

One director of Smithfield Foods Inc., who has a long involvement in the meat-processing industry, made the first insider stock purchase at the company in more than two years.

Paul J. Fribourg, whose ContiGroup Cos. acquired a 6.3% stake in the pork-and-beef company through the sale of Premium Standard Farms Inc. to Smithfield in May, reported Monday the purchase of about $9.43 million in Smithfield stock, giving ContiGroup a 6.5% stake in Smithfield.

"That's a business partner here that obviously has a lot of faith in Smithfield," Ben Silverman, research director at InsiderScore.com, said. "The fact that they agreed to the Premium deal, took this stake and now they've increased the stake, I think it's a positive, long-term picture here."

ContiGroup representatives didn't respond to requests for comment.

Founded in Belgium in 1813, ContiGroup first operated a grain-trading business before shifting to livestock production and processing in the past 50 years. Wayne Farms LLC, its largest business, is a poultry processor. Mr. Fribourg, whose family founded ContiGroup, has been the company's chairman and chief executive since 1997.

In 2005, ContiGroup and Smithfield merged their cattle-feeding businesses to form Five Rivers Ranch Cattle Feeding LLC, a 50-50 joint venture. The two companies announced in October they were planning a new joint venture that would build a beef-processing plant in Oklahoma, but Smithfield later said it was reconsidering the plan because of increased construction costs and difficulty finding labor.

After Smithfield's purchase of Premium Standard Farms, a provider of pork products, for about $800 million, Mr. Fribourg joined Smithfield's board, along with another ContiGroup representative who serves in an advisory position. ContiGroup's 38.8% stake in Premium Standard Farms translated into a 6.3% stake in Smithfield.

In a filing with the Securities and Exchange Commission on Monday, Mr. Fribourg reported the purchase of 315,000 additional Smithfield shares through ContiGroup, for an average of $29.93 each. This is the first purchase of stock reported by a Smithfield insider since June 2005, according to data provider Washington Service.

Smithfield shares are up 17% this year. But they are down 16% from a 52-week high of $35.79 reached in July amid concerns over high feeding costs and increased hog supplies in China, where Smithfield is set to export 60 million pounds of pork by the end of 2007. Smithfield shares rose 30 cents, or 1.2%, to $30 in 4 p.m. New York Stock Exchange trading yesterday.

Mr. Silverman said ContiGroup saw the weakness in the stock as a buying opportunity. When it reported its Smithfield stake in May, ContiGroup filed as an activist investor, saying it acquired its stake "primarily for investment purposes." and may "explore an extraordinary corporate transaction."

Mr. Silverman said ContiGroup's ties with Smithfield and experience in the industry suggest more a long-term partnership than a short-term strategy. "It's a positive because these guys are in the business," he said.

Write to Nicolas Brulliard at nicolas.brulliard@djn.com1