WASHINGTON, Sept. 6, 2013 – A U.S. government panel today approved the purchase of Smithfield Foods, the largest U.S. pork producer, by Chinese firm Shuanghui International, in a move valued at about $7.1 billion and representing the largest purchase of a U.S. company by China.
The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee chaired by the treasury secretary and authorized to review transactions involving U.S. businesses being bought by a foreign entity, approved the merger after a 45-plus day review.
The transaction remains subject to Smithfield shareholder approval, which is scheduled for a vote on Sept. 24.
Shuanghui International is part of China’s largest meat processing enterprise and its largest publicly traded meat products company. Under the terms of the agreement, Shuanghui would acquire all of the outstanding shares of Smithfield for $34.00 per share in cash.
“This transaction will create a leading global animal protein enterprise,” said Zhijun Yang, chief executive officer of Shuanghui International. “Shuanghui International and Smithfield have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company.”
C. Larry Pope, Smithfield chief executive officer and president, added, “We are pleased that this transaction has been cleared by CFIUS, and we thank the committee for its careful attention to this review.”
Senate Agriculture, Nutrition and Forestry Committee Chairwoman Debbie Stabenow, D-Mich., noted that because the CFIUS review includes issues of national security, it is done in secret with no public oversight or transparency.
“It remains unclear what factors the [CFIUS] took into account in making its decision,” Stabenow said. “We still do not know if the potential impact on American food security, the transfer of taxpayer funded innovation to a foreign competitor, or China’s protectionist trade barriers were considered.”
Stabenow said her committee will continue to examine the effectiveness of the review process for future similar acquisitions.
Rep. Rosa DeLauro, D-Conn., who is a staunch food safety advocate, said she was “deeply troubled” by the CFIUS decision.
“Smithfield’s acquisition by Shuanghui raises a host of economic and public health issues, which I raised with regulators during this process,” DeLauro said. “I look forward to discussing with Treasury officials and other regulators the extent to which they analyzed the impact the acquisition will have on the short- and long-term ability of the United States to protect intellectual property rights, as well as the safety and security of the U.S. food supply system. This is unlikely to be the last time a Chinese firm seeks to make a major purchase in our food and agriculture sector.”
The decision also drew criticism from National Farmers Union President Roger Johnson, who said, “Today’s ruling by CFIUS on the proposed acquisition of Smithfield Foods by Shuanghui Intl. is a disappointment for family farmers and ranchers across the United States. The deal represents the sale of one quarter of U.S. hog processing to a quasi-state-owned Chinese enterprise and is a dangerous precedent, in terms of food security and market competition.”
Earlier today, Smithfield reported a 10 percent increase in quarterly sales and a decrease in net income of about 32 percent in the first quarter of fiscal year 2013 compared to the same period last year.
CFIUS members include the secretaries of the State Department, the Defense Department, the Justice Department, the Commerce Department, the Energy Department, the Homeland Security Department, as well as the heads of the Office of the U.S. Trade Representative and the Office of Science and Technology Policy.
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