Chinese Firm Bids $4.7 Billion for Virginia's Smithfield Foods

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Getty Images
By MICHAEL FELBERBAUM

RICHMOND, Va. -- Shuanghui International Holdings Ltd. has agreed to buy Smithfield Foods for approximately $4.72 billion, the largest acquisition of a U.S. company by a Chinese company.

Hong Kong-based Shuanghui owns a variety of global businesses that include food, logistics and flavoring products and is China's largest meat processing enterprise. Smithfield, the world's biggest pork producer, owns brands such as Armour, Farmland and its namesake label.

Shareholders of Smithfield will receive $34 a share under terms of the deal announced Wednesday -- a 31 percent premium to the Smithfield, Va., company's closing stock price Tuesday of $25.97.

Both companies' boards have unanimously approved the transaction, which still needs approval from Smithfield's shareholders. The transaction may also be subject to review by the U.S.'s Committee on Foreign Investment.


The companies put the deal's total value at about $7.1 billion, including debt. Smithfield Foods Inc. (SFD) has about 138.8 million outstanding shares, according to FactSet. Smithfield's stock will no longer be publicly traded once the deal closes.

Its shares surged $7.23, or 27.8 percent, to $33.20 in premarket trading Wednesday.

Shuanghui has 13 facilities that produce more than 2.7 million tons of meat a year. Under the agreement, there will be no closures at Smithfield's facilities and locations, including its Smithfield, Va., headquarters, the companies said.

Smithfield's existing management team will remain in place and Shuanghui also will honor the collective bargaining agreements in place with Smithfield workers. The company has about 46,000 employees.

"This transaction preserves the same old Smithfield, only with more opportunities and new markets and new frontiers," Smithfield CEO Larry Pope said in a conference call. "This is not a strategy to import Chinese pork into the United States ... this is exporting America to the world."

With China and U.S. being "the most important markets," Zhijun Yang, managing director of Shuanghui, said in a conference call with investors, "together we can be a global leader in animal protein. No other combination has such a great opportunity."

In recent months, Smithfield's second-largest shareholder, Continental Grain Co., has been pushing Smithfield to consider splitting itself up, saying it was time for the company to "get serious about creating shareholder value." Following a March letter from Continental Grain, Smithfield said it would review the suggestions "in due course." Representatives from Continental Grain did not immediate provide comment regarding Wednesday's news.

In its most recent quarter, in March reported its net income rose more than 3 percent, helped by gains in hog production, its international business and its packaged meats such as deli meats, bacon, sausage, and hot dogs -- a large growth area for the company.

Still pork producers like Smithfield have been caught in a tug of war with consumers. The company needs to raise prices to offset rising commodity costs, namely the corn it uses for feed. But consumers are still extremely sensitive to price changes in the current economy. By raising prices, Smithfield risks cutting into its sales should consumers cut back or buy cheaper meats, such as chicken.

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AP business writer Michelle Chapman in New York contributed to this report.


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althea.marti

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June 04 2013 at 4:27 PM Report abuse rate up rate down Reply
Sterling Lieb

You will not have to buy Smithfield products. They will all be exported to China. But, hey, American consumers are just as guilty as the corporate giants who have been selling our economy down the drain for years in the name of profit. You get what you buy, when you fail to read the label. Maybe the government should place high taxes on imports in order to make manufacturing in America more desireable and bring jobs home. Good-bye Smithfield, and good-bye to Smithfield products. Buy American made products and make America strong.

May 31 2013 at 12:51 PM Report abuse rate up rate down Reply
Lillian

What is that worker doing with his right hand?

May 30 2013 at 6:40 PM Report abuse rate up rate down Reply
palmejn

Smithfield has been our favorite ham for years. However, I AM SENDING THIS TO ALL 3000 PEOPLE ON MY E-MAIL LIST. WHY SHOULD AMERICAN EAT THE DEAD PIGS FLOATING, BLOATED DOWN CHINA'S FILTHY RIVERS?

SO LONG SMITHFIELD - YOU ARE NOW ANTI-AMERICAN. JUST SAY NONONO TO CHINESE PRODUCTS.

May 30 2013 at 5:59 PM Report abuse +1 rate up rate down Reply
Harry

NO MORE SMITHFIELD PRODUCTS IN MY HOME

May 30 2013 at 2:44 PM Report abuse +2 rate up rate down Reply
garabian

If ANYTHING intended for human consumption has the brand of China, that does it. I will NEVER ea anything made or producedc in or by Chinese. If I am prejudiced, so be it.

May 30 2013 at 2:35 PM Report abuse +1 rate up rate down Reply
dg

only the beginning of all these sellouts.i guess i will not be buying their product anymore.no regulations in china,,,,anything goes including food products

May 30 2013 at 2:32 PM Report abuse +1 rate up rate down Reply
d1313

God help us! We are going to wait until every one owns us and it will be to late to get any thing but for our children. Let's stop living for today and start living for our children's future!! Even if you don't have children let's still care about the future of our country! Stop buying any thing from Smithfield, Armour and Farmland. It's really not hard to do. Don't buy any thing for foreign unless you really have to but think first. Let's save our Country!!!!

May 30 2013 at 1:37 PM Report abuse +1 rate up rate down Reply
vaughnk145

It was just a while ago that dead pigs were found floating down a river in China, presumably caused by disease.....It doesn't make me feel comfortable to have Smithfield purchased by a Chinese company.....

May 30 2013 at 1:32 PM Report abuse +2 rate up rate down Reply
pezallis

I've been a faithful patron of Smithfield meat products for years. I can't beleive they sold us out to the Chinese. The Chinese have very little regulation on their products. I won't even buy pet treats from China, let alone eat their food products myself. Goodbye Smithfield!!!!! You sold yourself down the shitter!

May 30 2013 at 1:13 PM Report abuse +2 rate up rate down Reply