Chinese Meat Producer to Buy Smithfield Foods
In a deal considered to be the biggest takeover of a U.S. company by a Chinese corporation, Chinese meat producer Shuanghui International Holdings Ltd. has announced plans to acquire Smithfield Foods Inc. for about $4.7 billion.
Shuanghui agreed to pay $34 per share for Smithfield, the world's largest hog farmer and pork processor. While the acquisition is making big news internationally, it is likely to face heavy regulatory scrutiny, experts said today. In addition, Smithfield chairman Joseph Luter said that other bidders for the company may still come forward, the Wall Street Journal reported.
Smithfield's shares jumped 25 percent to $32.47 on news of the deal.
Smithfield CEO Larry Pope acknowledged that the company's customers and other stakeholders might have concerns about food safety and politics. He said the company will contact its customers in coming days to get their reaction to the deal.
In addition, the companies said they would submit the deal voluntarily for review by the Committee on Foreign Investment in the United States.
During a conference call with analysts, Pope said the acquisition is about exporting more of Smithfield's meat to China and elsewhere in Asia, and not importing Chinese pork. Currently, about 25 percent of Smithfield's exports are to China.
"There will be no impact on how we do business operationally in America," Pope said. "This transaction is good for our business and for the producers and suppliers for whom we work."
According to Pope, Smithfield first broached the idea of a deal with Shuanghui about four years ago and has had discussions with the Chinese company since then, but "pricing has always been an issue."
Shuanghui, based in Henan province in central China, is the majority shareholder of China's largest meat processor, Henan Shuanghui Investment & Development Co., which is publicly listed in the Chinese city of Shenzhen. Shuanghui sells products under the English name Shineway.