US approves Chinese food major Shuanghui's acquisition of Smithfield Foods for $7.1 bn

The US Committee on Foreign Investment (Cfius) yesterday approved Shuanghui International Holdings Ltd's proposed acquisition of Smithfield Foods Inc for $7.1 billion, the biggest takeover of a US company by a Chinese firm.
(Cfius), an inter-agency executive branch panel that examines foreign investment for potential threats to national security, approved the deal although some lawmakers had opposed on the grounds that the Chinese company would be lax on food safety standards.

Critics had raised concerns that Americans' health would be at risk since the Chinese company could compromise food safety standards.

The US Senate Agriculture Committee had earlier held a hearing to review whether overseas takeovers of American food producers were in the country's best interests.

Senator Debbie Stabenow, a Democrat from Michigan and chairwoman of the committee, said in a statement: ''It remains unclear what factors the committee took into account in making its decision. We still do not know if the potential impact on American food security, the transfer of taxpayer-funded innovation to a foreign competitor, or China's protectionist trade barriers were considered.

''This transaction will create a leading global animal protein enterprise,'' said, Zhijun Yang, Shuanghui's CEO in a statement. ''Shuanghui International and Smithfield have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company.''

Although the deal has been approved by Cfius, shareholders of Smithfield have yet to vote on the deal on 24 September.

Starboard Value, an activist investor which holds 5.7 per cent in Smithfield, has opposed the deal and said that it is in talks potential rival suitors who were willing to pay more than Shuanghui's $34-a-share offer.

In May, Shuanghui, China's largest meat producer, agreed to buy Smithfield Foods for $7.1 billion including debt. (See: China's largest meat producer Shuanghui to buy Smithfield Foods for $7.1 bn) http://www.domain-b.com/industry/Foods/20130529_shuanghui.html

Under the terms of the deal that had been agreed by the board of both companies, Shuanghui, also known as Shineway, has offered to pay $34-a-share or $4.7 billion in cash, a premium of around 31 per cent over Smithfield's 28 May closing price of $25.97.

The total deal value is around $7.1 billion, including Smithfield's net debt of $2.4 billion.

Upon closing, Smithfield will operate under its own name as a wholly-owned independent subsidiary of Shuanghui.

Hong Kong-based Shuanghui said that it will honour all agreements in place with Smithfield's employees, as well as existing wage and benefit packages and will not close any facilities.

It has also pledged to maintain Smithfield's headquarters in Smithfield, Virginia, while the existing management team will continue to run the company.

Smithfield, whose brands include Eckrich, Farmland, Armour, Cook's, Gwaltney, John Morrell, has grown from a small packing plant into a global food company with a presence in 12 countries.

Its presence in Smithfield has made the small town to be known as the Ham Capital of the world.

Today, Smithfield Foods is the world's largest pork processor and hog producer. It is also the leader in numerous packaged meats categories with popular brands including Smithfield, Carando, Margherita, and Healthy Ones.

Smithfield Foods has a market cap of 3.6 billion and annual turnover of $13 billion.

Based in the city of Luohe, Henan Province, Shuanghui is China's largest meat producer, processing over two million five hundred thousand tons cooked meat products annually.

Shuanghui also has several divisions, including fresh and frozen meat, cooked meat products, chemical packaging, and pig breeding division.

The company says it has assets over 10 billion RMB and employs over 50, 000 people.