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.
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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to the devil with china and our butt kissing corporate sell-outs
I do hope this place goes under and completely bankrupt
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 $$$.
Smithfield can bite me. I'll NEVER buy another of their products. I like to make my own ham & beans. I got 2 packages of Smithfield Ham Hocks(big pot of beans), Got them home and prepared to add them to the beans and they were smoked pig's feet! No meat and no flavor. :( I emailed the company and was ignored.
Smithfield can go under for all I care, just another corporate rip-off of the consumer.
Hmmm, Smithfield, Armour and Morrell, same company. More product to boycott.
China already ownes over 10% of america now. Other foreign own as much 15% and hardly any of them could be considered friends. They all have $$$$ so that means that they can buy enough of congress to get what they want
( oh, i mean contribute to thier campain fund).
We are soon to be completely owned by China! And by the way it is SMITHFIELD, VA
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A basic income policy can actually ensure a decent standard of living for everyone.
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