Smithfield to merge with Chinese company
Published 11:45 pm Wednesday, May 29, 2013
Smithfield Foods Inc. on Wednesday announced a proposed merger with a Chinese meat-processing company that values Smithfield at $7.1 billion.
Under the agreement, the Virginia-based company will become a wholly owned independent subsidiary of Shuanghui International Holdings Limited. Company headquarters will remain in Smithfield, no facility closures are expected and the new company will honor collective bargaining agreements and wage and benefit packages in place for Smithfield’s 46,000 employees, according to Larry Pope, president and chief executive officer of Smithfield.
“This is an exciting day for Smithfield,” Pope said on a Wednesday morning conference call for investors. “Shuanghui is committed to maintaining Smithfield’s staff and management. Let me repeat for Smithfield employees — this transaction will not change their jobs or responsibilities in any way.”
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Pope said Smithfield has been working with Shuanghui for many years and has been discussing a merger since 2009.
“Pricing’s always been a bit of an issue,” he said. “The Asian market is a huge opportunity for us as a company. Exports are an extremely important part of this industry.”
The merger has been approved unanimously by the boards of directors of both companies, Pope said. However, it still is subject to approval by government agencies, as well as by Smithfield shareholders, who would receive $34 per share in the all-cash transaction.
Smithfield will cease trading on the New York Stock Exchange. The merger is expected to be complete sometime in the second half of this year, Pope said.
The transaction will be financed through a combination of cash provided by Shuanghui, rollover of Smithfield debt and debt financing committed by Morgan Stanley Senior Funding and a syndicate of banks.
Zhijun Yang, the managing director of Shuanghui, said the company is excited about the transaction.
“Together, we can be a global leader in animal protein,” he said. “China and the U.S. are the most important markets. We are No. 1 in China. Smithfield is No. 1 in the U.S. No other combination has such a great opportunity.
“Chinese consumers like American pork. U.S. farmers want foreign markets for their pork,” he added. “We will not change the people, the places, the products or the leaders. We want business to stay the same, but better.”
Pope added that the company’s conversion to housing pigs in group housing at its suppliers would stay on track