Preliminary merger talks between Madrid-based Campofrio and Smithfield Foods' 50 percent-owned European unit, based in Paris, were revealed last week. 

The all-stock deal will create a single entity with about 2.1 billion euros (about $3.3 billion) in annual sales, Reuters reported. Campofrio will own 51.5 percent of the merged company.

In a statement, Smithfield said it expected the merger to close in its third quarter, late in calendar 2008. It still awaits regulatory approval and the approval of both companies' shareholders.

Debt concern

The merged company will have a strong presence in Spain, France, Portugal, Belgium, the Netherlands, Britain, Germany, Italy, Russia and Romania.

Campofrio shares, which rose on news of merger talks last week, were trading down more than 5 percent in late day trading on the Barcelona Stock Exchange after the deal was announced. The stock fell on concerns about Smithfield's estimated European debt of 264 million Euros, according to Reuters.

Smithfield shares were trading at $19.83, down 2 cents, in morning trade on the New York Stock Exchange.

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