China's AgFeed buying U.S. hog producer for $16M
July 21, 2010
by Meat&Poultry Staff
DES MOINES — AgFeed Industries Inc., a China-based pork and animal-feed manufacturer, said announced on July 20 it will buy U.S. hog producer M2P2 LLC for $16 million in cash and stock in a move to further modernize its farming methods and nearly triple its hog production by 2015, according to The Associated Press. M2P2 produces 1.3 million pigs annually with sow operations in Colorado, Oklahoma and North Carolina, and finishing operations centered in Iowa.
In May the Ames, Iowa-based company teamed up with AgFeed to establish a management company in Asia, AgFeed International Protein Technology Corp., which is focused on introducing the Western model of pork production to China and Asia. AgFeed, a U.S. company with its primary operations in China, says the purchase price is comprised of 80% cash and 20% AgFeed stock.
M2P2 Chairman John Stadler is expected to join AgFeed's board when the deal is completed. The company said the deal won't impact staffing and all employees will be retained.
Fred Rittereiser, a special adviser to AgFeed, said the M2P2 acquisition will help AgFeed boost its hog production by implementing more efficient Western-style production methods. He added M2P2 has been a leader in the U.S. hog industry and has the expertise that's needed to modernize China's pork industry.
By learning and implementing M2P2's practices, AgFeed believes it can increase its production from a current ratio of about 90,000 pigs annually per 5,000-sow operation to as many as 125,000 pigs a year. "By 2015 we will be producing 2 million pigs a year compared to about 700,000 last year," Rittereiser said.
Seventy-five percent of all hogs raised in China are raised by producers who raise five hogs or less with little to no oversight, he added.
U.S. producers are focused on biosecurity and improving their herds through "very modern management procedures and the use of science-based genetics," Rittereiser said. The result is higher birthrates in a healthier environment, he added.
AgFeed is one of the largest independent hog production and animal nutrient companies in China, where there is a sizable market for pork. It currently has plans to build 13 Western-style farms in two Chinese cities by 2014.
AgFeed also plans to sell one-fifth of its animal nutrients feed unit in a stock offering as it focuses more on compound and concentrated feed markets, which make up most of China's current expanding production.
Shane Ellis, a livestock economist at Iowa State University, said modernizing China's own pork industry will have little impact on U.S. exports to mainland China.
In the first five months of 2010, the U.S. exported about 6.5 million lbs. of pork to mainland China. About 126 million lbs. were exported to Hong Kong during that same period.