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Chinese company buying Smithfield

Jeff Caldwell 05/29/2013 @ 8:18am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The name synonymous with integrated pork production in the U.S. now has a new home in central China.

Company officials with Smithfield Foods and Shuanghui International, a central China-based meat processing company -- that country's largest -- announced Wednesday that Shuanghui would acquire Smithfield for $4.7 billion (U.S.). Under the deal that Smithfield leaders say values their company at $7.1 billion, Shuanghui will buy outstanding shares of Smithfield -- representing just over 30% of the company's worth -- for $34 each.

Smithfield's operations in the U.S. and abroad won't see much change, if any, says president and CEO C. Larry Pope. The acquisition is instead an opportunity for growth down the road.

"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," Pope says in a company report on Wednesday. "With our shared expertise and leadership, we look forward to accelerating a global expansion strategy as part of Shuanghui."

Pope's counterpart at Shuanghui, chairman Wan Long, says the move combines two companies with equal industry status in their respective nations, and that his company will offer Smithfield access to a booming market, while Smithfield offers an operational base that's not found in other companies, Long says.

"The acquisition provides Smithfield the opportunity to expand its offering of products to China through Shuanghui's distribution network. Shuanghui will gain access to high-quality, competitively-priced and safe U.S. products, as well as Smithfield's best practices and operational expertise," Long says. "We were especially attracted to Smithfield for its strong management team, leading brands, and vertically integrated model."

The deal may not go as swimmingly as company leaders hope. There's been pressure from shareholders lately to remedy what they call "inadequate" performance. Just last week, officials with Smithfield's largest shareholder, Continental Grain Company, issued a report highlighting their ideas for Smithfield to erase its "long history of underperformance" and recommended ways they felt the company's value could grow domestically.

The primary way the report shows Smithfield can achieve better gains is by splitting into three independent companies, Continental officials say. Without doing so, they say the company is maintaining "a continuation of an unacceptable status quo," according to the report.

Shuanghui's acqusition of Smithfield -- pending regulatory approval -- is expected to be finalized "in the second half of 2013," according to Smithfield.

That regulatory approval may not be a slam dunk, however; one lawmaker issued a statement Wednesday foreshadowing it may be a tough deal to meet that regulatory approval. Congresswoman Rosa DeLauro of Connecticut, former chair of the House subcommittee for USDA funding, said in a statement Wednesday that it could be a tough row to hoe for the companies involved in light of potential food safety missteps that could endanger consumers.

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Pork Opportunity? 05/30/2013 @ 8:40am Given the reported unhappiness with Smithfield's shareholders and the skepticism of some U.S. legislators, this move may shine some light on opportunities for alternative pork producers to arise. I bet Murphy Family farms loves this deal. I noted that the Chinese official Long liked the Smithfield vertical integration. I bet he did. And, I would bet the next step in vertical integration is to get to the feed processing facilities and eventually the corn field. The Chinese are going to find that vertical integration only goes about so far and maybe they are about there already.

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Sweet & Sour 05/29/2013 @ 4:52pm Will the integrator operators be paid with "yang " instead of $$$$ ?

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