Smithfield Foods Inc., Smithfield, Va., on June 30 struck a deal to sell 7 million shares, or 4.95 percent of the companys common stock, to Cofco Ltd., China's largest national agricultural trading and processing company.
Smithfield expects to close promptly on an initial $63.1 million of the shares, with the remainder coming after a Hart-Scott-Rodino antitrust review. The company plans to use the proceeds of the sale to repay indebtedness and for other general corporate purposes.
Cofco is owned by the government of the People's Republic of China and has substantial business interests in food and beverage production, commercial and residential real estate, hotel operations, financial services and packaging. C. Larry Pope, Smithfield's president/CEO, said of Cofco, We have been working closely together and this investment represents a significant step in cementing our relationship for the long term."
"China is experiencing rapid growth in pork consumption and consumes more pork than the rest of the world combined, Pope continued. Cofco has introduced Smithfield to many opportunities in China, and we look forward to continue working together."
Gaoning Ning, chairman of COFCO, added, "Smithfield is the world's largest producer and processor of pork. We look forward to building on our existing commercial relationship and exploring growth opportunities in China's food industry together." In connection with the sale, Smithfield has agreed to nominate Ning for election as a director at its 2008 annual shareholders' meeting. COFCO's investment in Smithfield is passive in nature and the purchase agreement contains standstill provisions.