Will Smithfield pork become Chinese food?

A bold bid worth $7.1 billion altogether from Shuanghui Group could run into opposition from the US government.

By Jonathan Berr May 29, 2013 10:59AM
File photo of slices of a Smithfield boneless ham (© Toby Talbot/AP Photo)Smithfield Foods (SFD) shares leaped Wednesday after The Wall Street Journal reported the world's largest pork processor and hog farmer has agreed to be acquired by China's Shuanghui Group for $7.1 billion, including the assumption of debt. That would make it the largest Chinese acquisition of a U.S. company.

Shuanghui has agreed to pay $34 per share for the Smithville, Va., company, which was founded in 1936. That's a 31% premium over Tuesday's closing price, provided that the deal clears U.S. regulatory scrutiny -- which is hardly guaranteed. The Committee on Foreign Investment in the U.S., which shot down CNOOC's (CEO) plan to acquire Unocal in 2005, will review this deal as well.

The Unocal deal was rejected for national security reasons. Whether the U.S. government will have similar worries about foreign control over the U.S. bacon and pork supply remains to be seen. Some pundits, including CNBC's Jim Cramer, are speculating that Smithfield may attract a counteroffer. None has materialized yet, but it's still early.

Cognizant of the risks, the Chinese company is taking steps to assuage the concerns of U.S. regulators and consumers. It will retain Smithfield's existing management team. Moreover, Shuanghui will pay Smithfield a breakup fee if the deal fails to pass regulatory muster, according to The Wall Street Journal. Smithfield's headquarters are in the district of House Majority Leader Eric Cantor, R-Va., who's one of the most powerful members of Congress, adding an extra wrinkle to the deal.

Acquiring Smithfield will enable Shuanghui to gain access to safe food. Earlier this year, the bodies of 16,000 diseased pigs were found in a river in China and threatened to contaminate the water supply of Shanghai. Yum Brands (YUM), parent of KFC, has been dogged by concerns about the safety of its meat supply in China for months. 

China, which has the world's largest pork market, earlier this year banned pork fed with a supplement using ractopamine, which is used to produce leaner meat. Smithfield has quit using the chemical and was able to resume exports to China, which buys about 12% of the U.S. pork supply.

Smithfield, whose brands include Smithfield, Armour and John Morrell, had been under pressure from activist investor Continental Grain to consider splitting up the company, which has been struggling in recent years, thanks to rising costs for corn and a glut in the supply of pork.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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48Comments
May 29, 2013 12:39PM
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and the selling of America continues.
May 29, 2013 12:39PM
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I will never feel safe eating any meat made or controlled by the Chinese.  The Chinese are great entrepreneurs and capitalists so they will do anything to make the maximum buck.  Only God and the Chinese will actually know what the Chinese will put into the food.  I would also expect a great shortage of dogs, cats and horses in China in the near future. 
May 29, 2013 12:38PM
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Maybe we should tell them they can have all the pork they want if they'll stop stealing our military secrets.  Why why why do we continue to do so much business with them!!
May 29, 2013 12:32PM
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As they buy our politicians to open the doors, they are taking over America, buying the US deficit, companies etc... step by step but surely. Keep an eye on your chicken G-Man, they may look Asian already and you don't know it.
May 29, 2013 12:58PM
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We have to stop selling out America to foreign investors, they want to invest, fine, but they should not be allowed to own controlling interest in any domestic company. 
May 29, 2013 12:57PM
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When we start selling our food supply to the Chinese, it will also become  a national security issue.  Whoever controls the food, will control our country, and the Chinese  aren't  exactly our bosom  buddies.
May 29, 2013 12:36PM
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Why don't the commie bastards eat those rotting hogs floating in their polluted rivers? Screw 'em.
May 29, 2013 12:41PM
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I hope that all farmers that raise hogs quit selling hogs to that bunch of crooks.
May 29, 2013 12:57PM
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Just another thing I will have to add to my list to never buy again.  Although in this case, I don't think I ever bought it in the first place. I do not support China.  I do not support Chinese imports. I do not support Walmart or any store that has a majority of made in China product.  I do not support communism.
May 29, 2013 1:05PM
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The communist Chinese makes US companies buy into and partner with a chinese car company to build a assy plant in their country! They limit any American investing to 35% in Communist China. Lets play like they do ! But WAIT!!!! This is the USA people , our CONGRESS says that we have free enterprise and a free market system . RIGHT??? That's what a lot of posters ON THIS BOARD say !! You can blame Obama all you want but this has been going on for 50yrs PEOPLE... <<< But then the idiots on this board think that wall street is a free market ? LMFAO ... Why don't we sell them the US CONGRESS .. Oh wait they already bought them ... LOL LOL ... I get better representation from my UNION than any person or party in the US CONGRESS...
May 29, 2013 4:21PM
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Goodbye Smithfield ham.   You are no longer welcome at my house.
May 29, 2013 9:09PM
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I will no longer be buying Smithfield products.
May 29, 2013 12:59PM
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If Smiithfield, wants to continue to have American eating their products, China DA approved products are not that appetizing to us.  My heart sank when Lenovo bought IBM pc, and now this.  What happened America?
May 30, 2013 6:23AM
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Just something else the chinese can poison. Dog food, dry wall, and now the ham.
to the devil with china and our butt kissing corporate sell-outs

I do hope this place goes under and completely bankrupt

May 29, 2013 1:11PM
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US needs to step in and start blocking this stuff.  US needs to stay US strong or the whole county is going to be controlled by the Chinese soon.

 

They take over and how much is going to change?  They need to focus on China and the problems and troubles they are causing in their own industries first.    To me, this is just another means of taking over so they can be free to control the herds and do what they want to "genetically alter" them to make more $$$.

May 29, 2013 10:28PM
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Smithfield can bite me. I'll NEVER buy another of their products. I like to make my own ham & beans. I got 2 packages of Smithfield Ham Hocks(big pot of beans), Got them home and prepared to add them to the beans and they were smoked pig's feet! No meat and no flavor.  :(     I emailed the company and was ignored.

 

Smithfield can go under for all I care, just another corporate rip-off of the consumer.

 

Screw 'em.

 

Hmmm, Smithfield, Armour and Morrell, same company. More product to boycott.

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China already ownes over 10% of america now. Other foreign own as much 15% and hardly any of them could be considered friends. They all have $$$$ so that means that they can buy enough of congress to get what they want

( oh, i mean contribute to thier campain fund). 

May 29, 2013 5:08PM
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You know what - Cook's Brand makes a delicious Ham!
May 29, 2013 3:48PM
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We are soon to be completely owned by China! And by the way it is SMITHFIELD, VA

May 29, 2013 1:14PM
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If they "THE GOVERNMENT" allow this to go through..Line all the bastards up and shoot them ded.
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