September 6, 2013 11:51 pm

Go-ahead for Shuanghui’s $4.7bn Smithfield deal

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Smithfield Foods Inc. bacon sits on display for sale at a supermarket©Bloomberg

Shuanghui International’s $4.7bn acquisition of pork producer Smithfield Foods has received clearance from the US Treasury department which reviewed the deal for national security concerns, the companies said on Friday.

The approval from the Committee on Foreign Investment in the United States paves the way for the largest ever Chinese takeover of a US company.

Shareholders in Smithfield, the US’s largest pig farmer, are scheduled to vote on the deal on September 24. If approved, the deal will probably close soon afterwards.

“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,” Shuanghui chief executive Zhijun Yang said on Friday.

Smithfield chief executive Larry Pope said: “We are pleased that this transaction has been cleared by Cfius, and we thank the committee for its careful attention to this review.”

The deal has faced opposition from a bipartisan group of US lawmakers who were concerned about food security issues, including whether Chinese pork products could be exported to the US.

But Smithfield and Shuanghui officials stressed that the deal was about sending Smithfield products to China to meet demand there. Cfius legal experts had expected the deal to win clearance from the US government because it did not raise significant national security issues.

Although the approval from Cfius will be cheered by other Chinese companies eyeing US investments, certain sectors still face difficulties in gaining the go-ahead from government regulators.

For example, Chinese oil companies in recent years have acquired only minority stakes in assets of US oil and gas companies out of fear of raising the ire of US government regulators and politicians.

The Smithfield-Shuanghui deal still faces opposition from Starboard Value, an activist investor that has a 5.7 per cent stake in Smithfield. Starboard said in a letter to Smithfield this week that it had received interest from unnamed third parties for the company, which would value it above Shuanghui’s offer of $34 a share.

But without a confirmed, competing bid, Smithfield shareholders are likely to approve the Shuanghui offer.

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