LyrArc Article Gist
Shuanghui International Holdings, China's meat producing company, agreed to acquire U.S. meat producer Smithfield Foods Inc. for about $4.7 billion. The deal values Smithfield at $7.1 billion, including debt, and is at a premium of 31% to Smithfield share price on May 28, 2013 of $25.97. Smithfield sells products under grocery store brands and its own packaged brands Eckrich sausage, Smithfield bacon. Competitors are Hillshire Brands and Hormel Foods, which have national brands compared to the regional brands of Smithfield. The strategy of the previous CEO to buy hog farms alongside its pork processing plants led to problems under current CEO Larry Pope in 2008-2009, when the ethanol industry demands on corn supplies led to higher grain costs for the hog farms. A glut in pork supplies led to losses and share price declining to $6 per share during this period. The acquiring company Shuanghui is based in Henan province of central China, listed in Shenzhen, and sells products under the Shineway label. The deal now goes to the Committee on Foreign Investment in the U.S. for review. Concerns of food contamination are prevalent in China and the two companies emphasized their committment to "retain world-leading food safety and quality control standards."