Henan-based Shuanghui Group 双汇集团 in the works to buy the world’s biggest producer of pork to feed the world’s biggest consumer of the meat.
China’s Shanghai river pig toll nears 6,000 (BBC, March 13, 2013)
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China’s Shuanghui to buy US pork producer for $4.7bn
Source – BBC, published May 30, 2013
China’s Shuanghui International plans to buy US pork producer Smithfield Foods for $4.7bn (£3.1bn) to meet the country’s rising demand for meat.
Shuanghui, which is China’s biggest pork producer, is offering to pay for the company in cash.
The deal, if approved, will be the largest takeover of a US company by a Chinese rival.
In recent years there has been an increased appetite among Chinese firms for acquisitions abroad.
In the US, however, regulators have blocked a number of potential purchases on national security concerns.
Smithfield, which owns the Armour and Healthy Ones brands, said the deal would allow the firm to expand the sale of of its brands abroad.
However, the takeover bid is likely to be closely scrutinised in the US by regulators due to a regular series of Chinese food scandals, including the sale of tainted meat.
In 2011, China’s state broadcaster CCTV revealed that Hong Kong-based Shuanghui’s pork products contained the banned chemical clenbuterol, which makes the meat leaner.
One of the most infamous foods scandals was in 2008, when six infants died and about 300,000 fell ill from tainted milk powder. It was later found to have contained melamine, an industrial chemical.
As a result, there is increasing demand among Chinese consumers for foreign food brands, which are viewed as a safer alternative to local products.
In 2011, China’s state broadcaster CCTV revealed that Shuanghui’s pork products contained the banned chemical clenbuterol, which makes the meat leaner.
However, one of China’s most infamous foods scandals was in 2008, when six infants died and about 300,000 fell ill from tainted milk powder. It was later found to have contained melamine, an industrial chemical.
As a result of these scandals, there is increased demand among Chinese consumers for foreign food brands, which are viewed as a safer alternative to local products.
Shaun Rein, founder of China Market Research says Hong Kong-based Shuanghui is making a ‘very good’ purchase given their brand suffered reputational damage from the clenbuterol scandal.
“Having that American label is going to build trust with consumers,” he said. “The number of pork imports grew 500% between 2010 and 2011. Despite the cooling economy in China, consumers are willing top pay premium on safe food.”
‘Business as usual’
Smithfield Foods is the world’s biggest producer of hogs
Smithfield, which owns the Farmland, Armour and Healthy Ones brands, said the deal will allow the firm to expand the sale of its brands abroad.
“This is a great transaction for all Smithfield stakeholders, as well as for American farmers and US agriculture,” Smithfield Chief Executive Larry Pope said in a statement.
“It will be business as usual – only better – at Smithfield. We do not anticipate any changes in how we do business operationally in the United States and throughout the world. We will become part of an enterprise that shares our belief in global opportunities and our commitment to the highest standards of product safety and quality.”
Smithfield said it has accepted Shuanghui’s bid of $34 per share for the company, which was more than a third higher than Tuesday’s closing price.
The deal is expected to close in the second half of the year, after which Smithfield’s will also cease to be publicly traded.
Shares of Smithfield rose more than 28% to close at $33.35 in US trade on Wednesday.