RICHMOND, Va. (AP) - Pork producer Smithfield Foods Inc. said Monday it will sell Groupe Smithfield Holdings SL, its main European subsidiary to Campofrio Alimentacion SA, the largest processed meats company in Spain.

Campofrio will issue shares to Smithfield Foods and its joint venture partner Oaktree Capital Management LLC in exchange for all of the membership interests in Groupe Smithfield.

Smithfield, which owns 24 percent of Campofrio, will own 36 percent of the combined company.

The combined company will have sales of $3 billion and have a presence in Spain, France, Belgium and Portugal, as well as The Netherlands, Romania and Russia.

"This is another key milestone in Smithfield's strategy to enhance its processed meats presence globally," Smithfield Chief Executive C. Larry Pope said in a news release. "The two companies are very complementary, and merging them will provide many significant synergy opportunities."

Pope said there is a correlation between the size of an operation and its profitability in the European market, and the merger will make a stronger company.

Pedro Ballve, chairman of Campofrio, said the companies were a strategic fit, that enhances its "operating platform with complementary manufacturing and marketing."

The combined company will be headquartered in Madrid and operate under the Campofrio name.

The deal, subject to shareholder and regulatory approval, is expected to close in Smithfield's fiscal third quarter.

Shares of Smithfield Foods rose 3 cents, or 0.2 percent, to $19.88 Monday.

The nation's largest hog producer and pork processor said in early June that fourth-quarter profits fell 94 percent, hurt by rising grain costs and falling hog prices.

Smithfield's profit for the quarter ended April 27 was $2.4 million, compared to a profit of $37.1 million in the same period a year earlier. Revenue was up 20 percent to $2.87 billion from $2.39 billion last year.

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