China’s largest meat processor acquires Smithfield
SMITHFIELD, Va. — Hong Kong-based Shuanghui International Holdings Ltd., a majority shareholder of China’s largest meat-processing enterprise, has entered an agreement to acquire Smithfield Foods Inc. for approximately $7.1 billion, including assumption of debt.
The acquisition positions Smithfield to expand its offerings in China through Shuanghui’s distribution network. Shuanghui will acquire all of Smithfield’s outstanding shares for $34 per share in cash, which is a 31 percent premium to Smithfield’s closing stock price of $25.97 on May 28. Smithfield’s stock price rose nearly 28 percent to $33.20 before the market opened on May 29.
Upon closing of the transaction, Smithfield’s common stock will no longer be publicly traded, and the company will become a wholly owned independent subsidiary of Shuanghui. The deal is expected to close in the second half of 2013.
“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 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. 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. With our shared expertise and leadership, we look forward to accelerating a global expansion strategy as part of Shuanghui.”
Following the transaction, Pope will continue as president and CEO of Smithfield, and Smithfield’s existing management team, as well as the management teams and workforces of its independent operating companies, will remain in place. Additionally, there will be no closures at Smithfield’s facilities and locations.
“We are pleased to have reached this agreement with Smithfield, which represents a historic opportunity for both companies and their stakeholders,” said Wan Long, chairman of Shuanghui. “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 United States, while continuing to serve markets in the United States and around the world. The combination creates a company with an unmatched set of assets, products and geographic reach.”
The agreement provides Shuanghui with access to high-quality, competitively-priced and safe US products, as well as Smithfield’s best practices and operational expertise, Long added.
“We were especially attracted to Smithfield for its strong management team, leading brands and vertically integrated model,” Long said. “We look forward to working with Larry Pope and the many talented employees at Smithfield to grow the combined company as a leading global pork and processed meat producer with the same vision and values of providing high-quality and safe products to consumers.”
During a Smithfield teleconference following the announcement of this news earlier this morning, Zhijun Yang, managing director of Shuanghui, told participants: “Together, we can be a global leader in animal protein. China and the US are the most important markets. We are No. 1 in China; Smithfield is No. 1 in the US. No other combination has such a great opportunity. Chinese consumers like American pork. US farmers want foreign markets for their pork. This will be a win/win for both countries.”
“Let me repeat for Smithfield employees,” Pope said. “This transaction will not change their jobs or responsibilities in any way. There will be no closures of Smithfield facilities. Shuanghui will honor collective bargaining agreements in place with respect to our representative employees as well as existing wage and benefit packages for non-representative employees.
“Smithfield’ and its independent operating companies and its management teams and workforces will continue in place after the transaction,” he added. “Our headquarters will remain in Smithfield, Va. I will continue as Smithfield’s president and CEO and the Smithfield leadership team will remain in place. This transaction preserves the same, old Smithfield only with more opportunities in new markets and new frontiers.”