China’s largest meat producer Shuanghui to buy Smithfield Foods for $7.1 bn
29 May 2013
Shuanghui Group, China's largest meat producer, today said it would to buy US-based Smithfield Foods, Inc, for $7.1 billion including debt, in what would be the largest Chinese acquisition of an US company.
Under the terms of the deal that has 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 Tuesday 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 and become a wholly-owned independent subsidiary of Shuanghui International Holdings
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.
Shuanghui plans to fund the deal through a combination of cash, rollover of existing Smithfield debt, as well as debt financing that has been committed by Morgan Stanley and a syndicate of banks.
The closing of the transaction, which is expected in the second half of 2013, is subject to approval by Smithfield's shareholders, the US foreign antitrust and anti-competition laws and more importantly the Committee on Foreign Investment in the US (Cfius).
"This is a great transaction for all Smithfield stakeholders, as well as for American farmers and US agriculture," said Larry Pope, president and CEO of Smithfield.
"We have established Smithfield as the world's leading and most trusted vertically integrated pork processor and hog producer, and are excited that Shuanghui recognizes our best-in-class operations, our outstanding food safety practices and our 46,000 hard-working and dedicated employees,'' he added.
"We are pleased to have reached this agreement with Smithfield, which represents a historic opportunity for both companies and their stakeholders," said Shuanghui chairman Wan Long.
"Shuanghui is a leading pork producer in China and a pioneer in the Chinese meat processing industry with over 30 years of history. Smithfield is a leader in our industry and together we will be able to meet the growing demand in China for pork by importing high-quality meat products from the US, while continuing to serve markets in the United States and around the world."
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 has assets over 10 billion RMB and employs over fifty thousand people.
