Smithfield Completes Nathan’s Acquisition at $102 a Share
Key Facts
Smithfield Foods completed its acquisition of Nathan’s Famous before the market opened on October 26, according to Nasdaq, after Nathan’s shareholders approved the merger at a special meeting held on October 23. The agreement converts each eligible outstanding share into the right to receive $102 in cash, excluding shares whose holders properly exercised appraisal rights. The deal thus moved from an agreement announced in January to a completed acquisition, while procedures to suspend trading in Nathan’s shares are set to begin on October 27. Nasdaq said October 23 was the stock’s last trading day. The deal expands Smithfield’s ownership of a well-known hot dog brand with which it had operated under an exclusive license.
Smithfield valued the deal’s enterprise value at about $450 million, based on Nathan’s unaudited balance sheet for its latest reported fiscal quarter at the time the deal was announced. This valuation exceeds the announced cash consideration per share, as it reflects the company’s estimate of enterprise value. Smithfield valued the deal at 12.4 times Nathan’s last 12 months of adjusted earnings before interest, taxes, depreciation and amortization. The multiple falls to about 10.0 times when expected savings are included. This comparison ties the valuation to earnings levels and to the cost reductions the company expects after the acquisition.
Smithfield said the acquisition would immediately add to its adjusted diluted earnings per share from continuing operations attributable to the company. It also projected recurring annual operating cost savings of about $9 million by the second anniversary of the deal’s closing. The savings remain a forward-looking company estimate, tied to the passage of the period it specified after closing. Chief Executive Shane Smith described the deal as "an important step in Smithfield’s journey" and said it would allow the company to own the major brands in its packaged meats portfolio and open new growth opportunities. Smithfield linked the acquisition to strengthening its portfolio and growth opportunities, while the evidence so far includes no figure measuring its actual effect on earnings.
The commercial relationship between the two companies dates to March 2014, when Smithfield received an exclusive license to manufacture, distribute and market Nathan’s products in the United States and Canada, as well as at Sam’s Club stores in Mexico. The license was due to expire in March 2032. The acquisition shifts the relationship from time-limited usage rights to ownership of the brand within Smithfield. The company said completing the acquisition would secure its rights to the brand "forever." It also identified expanding growth opportunities through retail and foodservice channels among its goals for the deal.
On trading, Nasdaq announced that Nathan’s shares would remain halted on the closing day, with the suspension taking effect on October 27. October 23 was the stock’s last trading day, according to the schedule announced by the exchange. The company requested a trading suspension and delisting after the deal closed. This means the acquisition was completed before the regulatory halt and delisting procedures. The request to remove the stock does not by itself establish that the delisting was formally completed.