Smithfield Foods pulls back on merger plan

Subsidiaries to be melded were too big, firm says

December 02, 2004|By Chris Flores | Chris Flores,DAILY PRESS

Smithfield Foods Inc. will backtrack on a 1 1/2 -year-old plan to merge two subsidiaries because they were too large to run together.

Smithfield Foods, the No. 1 pork producer, has decided to keep Gwaltney of Smithfield and Smithfield Packing as separate subsidiaries. The combination created an organization that was large and cumbersome, with too many plants, brand names and sales teams under one umbrella.

"The companies operate separately better than together," C. Larry Pope, president of Smithfield Foods, said yesterday. "Sometimes you can get organizations that are simply too big."

Smithfield thought it could reduce overhead and logistics costs by combining operations, but the merger produced only "modest" savings, Pope said. The companies combined their food laboratories and purchasing and accounting departments, resulting in less than 25 layoffs.

Smithfield didn't get most of the merging done until September 2003. After a little more than a year, Pope decided it just wasn't working.

Combined wholesale sales, another piece of the merger, will remain intact along with the back-end operation. The Smithfield Foodservice Group was created by combining the sales groups from both companies to sell to food distribution companies such as Sysco Corp.

Pope said it was much more difficult to combine the retail sales forces of Gwaltney and Smithfield Packing, which compete with each other in selling to companies such as Food Lion and Wal-Mart Stores Inc. Brands aren't important to wholesalers, so that merger of sales teams worked fine, Pope said.

Timothy A. Seely, who was appointed to run the combined companies, will go back to his old job as president of Gwaltney. Joseph Luter IV, son of Smithfield Foods' chief executive, Joseph Luter III, will run Smithfield Packing.

The Daily Press, of Newport News, Va., is a Tribune Publishing newspaper.

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