SMITHFIELD, Va., May 30, 2013 – The announcement that Smithfield Foods, the largest U.S. pork producer, is poised to be purchased by Chinese meat processing company Shuanghui International was met Tuesday with skepticism from two U.S. lawmakers.
In separate statements, Sen. Charles Grassley, R-Iowa, expressed concern over agricultural consolidation, while Rep. Rosa DeLauro, D-Conn., focused on food safety issues.
Grassley noted the $7.1 billion deal needs to be reviewed by the Justice Department and the U.S. Committee on Foreign Investment (CFIUS).
“I share the concerns of many family farmers and independent producers that the agriculture industry has consolidated to the point where many smaller market participants do not have equal access to fair and competitive markets,” Grassley said. “Today’s announcement by Smithfield and Shuanghui do not alleviate those concerns.”
Grassley said the companies pointed out that vertical integration used by Smithfield was a major attribute in the deal.
“The fact of the matter is that vertical integration leaves the independent producer with even fewer choices of who to buy from and sell to and hurts a farmer’s ability to get a fair price for his products,” Grassley said. “Concentration also leads to consumers having fewer choices and higher costs at the grocery store. The Justice Department should take a close look at this agreement.”
Grassley said there are a number of points CFIUS must consider when looking at the deal.
“No one can deny the unsafe tactics used by some Chinese food companies,” Grassley said. “And, to have a Chinese food company controlling a major U.S. meat supplier, without shareholder accountability, is a bit concerning.”
According to the announcement, the companies entered into a definitive merger agreement that values Smithfield at about $7.1 billion. Under the terms of the agreement, Shuanghui will acquire all of the outstanding shares of Smithfield for $34.00 per share in cash.
The transaction is expected to close in the second half of 2013.
Shuanghui International is the majority shareholder of Henan Shuanghui Investment & Development Co., which is China’s largest meat processing enterprise.
Rep. Rosa DeLauro, D-Conn., a large proponent of food safety, weighed in as well.
“This potential merger raises real food safety concerns that should alarm consumers,” DeLauro said. “We know that Chinese food products have been a threat to public health and that Shuanghui was found to have produced and sold tainted pork. This merger may only make it more difficult to protect the food supply. I have deep doubts about whether this merger best serves American consumers and urge federal regulators to put their concerns first. I will be in touch with regulators throughout this process to ensure the public health and safety of the American public is safeguarded.”
In support of the Smithfield deal, a spokesman for the National Pork Producers Council (NPPC) told Agri-Pulse Wednesday that there is “no food safety concern” with the company’s merger plans.
“[DeLauro] is the one that led the charge against Chinese chicken imports,” he said. “This doesn’t have anything to do with that.”
The spokesman said NPPC sees a potential increase in U.S. pork exports to China and that “it’s not going to be the other way around.
“Smithfield is still in this country…they will follow U.S. food safety laws,” he said.
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