Smithfield’s Pope addresses doubts on merger during hearing
WASHINGTON — As anticipated, C. Larry Pope, president and CEO of Smithfield Foods, was vigorously questioned July 10 by Congressional lawmakers as to how the proposed $4.7 billion purchase of his company by Shuanghui International Holdings, China's largest meat producer, could impact the US food supply and agricultural producers.
This merger would be the largest takeover of a US company by a Chinese firm. The Shuanghui-Smithfield merger is expected to close later this year. Shareholders and regulators must approve the merger for it to be consummated.
Pope told a crowded Senate hearing that Smithfield remains committed to producing safe and plentiful food if the deal is approved. He named the benefits that would come from the takeover, including more jobs plus increased pork exports.
According to a report from USA Today, "This is a wonderful opportunity for the US to do what it does best: produce agriculture products and ship them around the world," Pope told the Senate Agriculture Committee. "This is an opportunity for US pork producers to grow."
Although Pope said the merger would have no noticeable impact on how Smithfield would do business both here and abroad – except to do more of it – committee members seemed unconvinced.
They relayed they were concerned the takeover would decrease the US pork supply as more pork is shipped to China plus the merger may result in the US being more susceptible to food-safety concerns that have affected Chinese companies, even Shuanghui. They also asked what would happen to Smithfield's intellectual property and the impact of the deal on US agriculture producers.
This deal needs to be a good one for US pork producers both in the short-term and long-term, said Sen. Debbie Stabenow, D-Mich., Agriculture Committee chairperson. Pope said the transaction would open up the market for US pork farmers by giving them more access to Shuanghui's large distribution system and millions of Chinese consumers as well as other Asian countries.
Smithfield has iterated over and over again that the merged company would maintain its current management and facilities while maintaining its ongoing relationships with US pork producers, which Pope said again during his testimony. Meanwhile, some Senators including Chuck Grassley, R-Iowa, and Tom Harkin, D-Iowa, as well as other lawmakers, have requested that the Committee on Foreign Investment in the United States (CFIUS) review the proposed merger and to include the Agriculture Department and the Food and Drug Administration in the process. After the July 10 hearing ended, lawmakers got together with CFIUS officials to question them about the proposed Smithfield merger.
Many have voiced concern about the proposed takeover regarding foreign investment in the US. Some fear China will be a more active player in the future.
"I think it is reasonable for you to expect a wave of Chinese investments into our food and agriculture industry, and this potential purchase is not a one-off," said Daniel Slane, a member of the US-China Economic and Security Review Commission, the government agency that monitors trade and economic relationships between both countries. "Today, it's Smithfield, but tomorrow, it could be Consolidated Grain, ConAgra or Tyson Foods."
Slane charged Shuanghui probably views the deal as one way to get Smithfield's intellectual knowledge of meat processing and animal genetics plus this would help minimize the risk of volatile commodity prices.