Smithfield’s Pope provides the details behind the deal
by Bryan Salvage
SMITHFIELD, Va. – Shortly after the news broke this morning that Hong Kong-based Shuanghui International Holdings Ltd., a majority shareholder of China’s largest meat-processing enterprise, had agreed to acquire Smithfield Foods Inc. for approximately $7.1 billion, Smithfield hosted a teleconference to elaborate on this news. (For more information, read China’s largest meat processor acquires Smithfield
During the teleconference Zhijun Yang, managing director of Shuanghui, and C. Larry Pope, president and CEO of Smithfield, made brief presentations detailing what this news means for the global pork industry as well as for both companies.
“We are excited about this,” Yang said. “Together, [Shuanghui and Smithfield Foods] 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.”
Pope added, “This is an exciting day for Smithfield and Shuanghui.” He explained the acquisition was unanimously approved by the board of directors of both companies. “[This] will create a leading vertically integrated global pork enterprise and set the global industry standard in food safety, environmental stewardship and animal welfare,” Pope said. “Our board is pleased with the outcome of the process leading to this transaction and we unanimously believe it is in the best interest of Smithfield and its shareholders.”
The transaction will provide value at a great price for Smithfield shareholders, Pope said. Under the terms of the agreement, Smithfield shareholders will receive $34 (US) per share in cash. “The combination of Shuanghui and Smithfield makes great strategic sense,” he added. “China is a large and growing market and is already the world’s single-largest, protein-consuming country. In addition, Asia as a whole is a tremendous and growing export opportunity for Smithfield.”
The US agriculture industry, with its best practices, food safety, sustainability and world-class logistics and efficiency will help this new entity to become the low-cost, high-quality producer of hogs and pork products in the world, officials said.
“We expect to help meet the growing demand for pork in China by exporting high- quality meat products from the US while continuing to serve markets in the US and around the world,” Pope said. “In short, this transaction is good for our business and for the producers and suppliers with whom we work. By combining both companies, we will accelerate both companies’ strategic plans, broaden our market reach and create exciting new growth opportunities.”
He went on to say the acquisition offers significant benefits for American farmers and US agriculture. “It creates a stronger Smithfield with more resources to grow and meet increasing global demand for high-quality pork,” Pope iterated. “Shuanghui is committed to investing in Smithfield to produce more food, more jobs and more value in the US.”
One key benefit from Smithfield’s perspective is the stability and continuity this transaction ensures. “There will be no impact on how we do business operationally in America and around the world as a result of this transaction,” Pope said. “Shuanghui is committed to maintaining Smithfield’s operations, its staff and its management. It is also committed to continuing the long-term growth of Smithfield and continuing to work with American producers and suppliers who play a key role in our success.”
Pope next discussed what this new move means to Smithfield’s employees. “Let me repeat for Smithfield employees: this transaction will not change their jobs or responsibilities in any way,” he said. “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, management teams and workforces will continue in place after the transaction. Pope said Smithfield’s headquarters will remain in Virginia and he, as well as the current Smithfield leadership team will remain in place.
“This transaction preserves the same old Smithfield, only with more opportunities in new markets and new frontiers,” he said
Pope reminded teleconference participants that the combined company is committed to maintaining Smithfield’s integrity and brand exports, as well as Smithfield’s six-pillar sustainability initiatives and extensive community support programs. Shuanghui recognizes Smithfield’s environmental and animal-welfare excellence, he added.
“At the end of the day this transaction is about growing the combined company into a leading global pork and processed meats producer with the same vision and values of providing high-quality, safe products to consumers,” Pope said.
This transaction is expected to close in the second half of 2013 and is subject to customary closing conditions and laws. Once the transaction is complete, Smithfield shares will no longer trade on the NY Stock Exchange and Smithfield will operate as a wholly owned independent subsidiary of Shuanghui International Holdings Limited operating as Smithfield Foods.
“We are excited about this strategic combination,” Pope said. “Having been business partners for many years, we know Shuanghui well and have tremendous respect for them and their distribution network in China. The combined company will be the leading vertically integrated global pork enterprise with greater access to the large and growing Chinese market and retains Smithfield’s world-leading food safety and quality-control standards.”