US pork processing giant bought out by China group

Posted by AFN Staff Writers on 3rd June 2013

China’s largest meat processing enterprise, Shuanghui International Holdings Limited (Shuanghui International) has announced a US$7.1 billion merger with the largest global pork producer, US-based Smithfield Foods Inc. (Smithfield).

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, Shuanghui International will acquire all the outstanding shares of Smithfield for US$34 per share in cash. The purchase price represents a premium of approximately 31 per cent over Smithfield’s closing stock price on May 28 2013, the last trading day prior to the announcement.

“This is a great transaction for all Smithfield stakeholders, as well as for American farmers and US agriculture,” said C. Larry Pope, President and CEO for 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 recognises our best-in-class operations, our outstanding food safety practices and our 46,000 hard-working and dedicated employees,” he said.

Smithfield said it did not anticipate any changes in business operations in the US or globally.

“We are pleased to have reached this agreement with Smithfield, which represents a historic opportunity for both companies and their stakeholders,” said Wan Long, Shuanghui Chairman.

Smithfield to access Chinese market

The acquisition puts Smithfield in a position to take advantage of Shuanghui’s distribution network in China.

“The acquisition provides Smithfield the opportunity to expand its offering of products to China through Shuanghui’s distribution network. Shuanghui will gain access to high-quality, competitively-priced and safe US products, as well as Smithfield’s best practices and operation expertise,” Mr Wan said.

Shuanghui International Holdings Limited is a Hong Kong-based holding company, which owns a variety of global businesses that include food, logistics and flavouring products. Its network includes production facilities in 13 Chinese provinces, 15 logistics centres, seven private railways, and more than 200 sales branches.

Shuanghui International and its subsidiaries are the majority shareholders of China’s largest meat processing enterprise, which is publicly traded as Henan Shuanghui Investment and Development on the Shenzhen Stock Exchange.

Shuanghui to address food safety issues in China

Shuanghui’s acquisition of Smithfield is part of the Company’s strategy to address issues of food safety in China’s food distribution network, Mr Wan told global research and news organisation, Bloomberg.

“Europe and America have excellent skills and equipment,” Mr Wan said. “If we go and purchase businesses from America and Europe, develop China’s meat industry, we will raise the level and standard of our food safety,” he said.

China has faced a spate of food safety scares recently, including the discovery of more than 9,000 dead pigs in Shanghai’s Huangpu river in March 2013.

Australian Food News reported in March 2013 that concerns about food safety had also led to Chinese authorities destroying food imported by Ikea, Kraft and Nestle, and that concerns about antibiotic levels in chicken had seen a drop in sales for KFC China.

Australia ‘food bowl for Asia’

Meanwhile, the Shuanghui/Smithfield deal may be closely watched by proponents of the ‘Australia the food bowl for Asia’ view.

The Australian Government’s recently released National Food Plan again suggested that Asian markets, including China, could provide the opportunity to increase its agricultural exports. The Government said it would invest $28 million in the Asian Food Markets Research Fund, which would include a ‘What Asia Wants’ study to identify food needs and preferences in the region.

According to data from the Australian Government’s ‘Australian Food Statistics 2011-12’ report, China is currently Australia’s fourth largest food export market, with exports to China in 2011-12 worth $1,018 million.

But, as reported by Australian Food News in April 2013, not all Australian food researchers and commentators are convinced that Australia will be able increase its production to meet Asian demand.