Smithfield Foods Inc. announced May 29 an agreement to be acquired by Chinese meat firm Shuanghui International Holdings Ltd. The “merger agreement” values Smithfield at approximately $7.1 billion, including the assumption of Smithfield's net debt, or $34 per share in cash, a premium of 31 percent over Smithfield's closing stock price on May 28.
The agreement already had been unanimously approved by the boards of directors of both companies. Shuanghui International is the majority shareholder of Henan Shuanghui Investment and Development Co., which is China's largest meat processing enterprise and China's largest publicly traded meat products company as measured by market capitalization.
"This is a great transaction for all Smithfield stakeholders, as well as for American farmers and U.S. agriculture," said C. Larry Pope, pres/CEO of Smithfield. "We have established Smithfield as the world's leading and most trusted vertically integrated pork processor and hog producer, and are excited that Shuanghui recognizes our best-in-class operations, our outstanding food safety practices and our 46,000 hard-working and dedicated employees. It will be business as usual — only better — at Smithfield.
“We do not anticipate any changes in how we do business operationally in the United States and throughout the world,” Pope continued. “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. With our shared expertise and leadership, we look forward to accelerating a global expansion strategy as part of Shuanghui."
Continental Grain Co., one of Smithfield's largest shareholders, recently has been pushing Smithfield to consider splitting itself up to increase shareholder value.
"We are pleased to have reached this agreement with Smithfield, which represents a historic opportunity for both companies and their stakeholders," said Shuanghui Chairman Wan Long. "Shuanghui is a leading pork producer in China and a pioneer in the Chinese meat processing industry with over 30 years of history. Smithfield is a leader in our industry and together we will be able to meet the growing demand in China for pork by importing high-quality meat products from the United States, while continuing to serve markets in the United States and around the world. The combination creates a company with an unmatched set of assets, products and geographic reach."
The acquisition will expand Smithfield’s products in China through Shuanghui's distribution network.
“Our board of directors is pleased with the outcome of the process we followed leading to this transaction, and we unanimously believe that this combination with Shuanghui is in the best interests of the Company, our shareholders and all Smithfield stakeholders," added Pope.
Upon closing of the transaction, Smithfield will be a wholly owned independent subsidiary of Shuanghui International Holdings Ltd., operating as Smithfield Foods. Pope will continue as pres/CEO of Smithfield, and the management teams and workforces of Smithfield's independent operating companies will continue in place after the transaction. Shuanghui will honor the collective bargaining agreements in place with Smithfield's represented employees, as well as existing wage and benefit packages for non-represented employees. Under the agreement, there will be no closures at Smithfield's facilities and locations, and Smithfield's existing management team will remain in place.
The transaction is expected to close in the second half of 2013.
Henan Shuanghui Investment and Development has production facilities in 13 Chinese provinces and four processing bases under construction. It produces over 2.7 million tons of meat per year, and is one of nine producers — and the only food enterprise — recognized for its quality management excellence by China's Administration of Quality Supervision, Inspection and Quarantine.