Founded in 1936 in Virginia, USA, Smithfield Foods gained rapid growth in the 1980s and became the top pork producer in the United States in 1998. It is the world’s largest pig producer and pork supplier. In May 2013, Smithfield and Shuanghui International reached a strategic merger. Shuanghui International will acquire Smithfield for a total price of US$7.1 billion.
On September 24, 2013, Shuanghui’s acquisition of Smithfield, the world’s largest hog slaughterer, was approved by the smithfield’s shareholders, which means that this Chinese company’s largest acquisition in the US cleared all obstacle. Smithfield is expected to finalize the transaction on September 26 and will be a wholly-owned subsidiary of Shuanghui International after delisting from the exchange.
Company Overview
Smithfield Foods has 4 pig farms, 850,000 pigs, 40 pork processing plants and 15.8 million pigs. The products are not only supplied within the United States but also exported to markets such as China, Japan, and Mexico. The financial report shows that Smithfield’s fiscal year 2012 (as of April 29, 2012) sales of 13.1 billion US dollars, net income of 360 million US dollars. In revenue, the pork sector contributed 11.1 billion U.S. dollars, the hog production sector contributed 3.05 billion U.S. dollars, and the international business sector contributed 1.47 billion U.S. dollars. As of 2012, the company’s debt was 1.64 billion U.S. dollars, and its debt ratio was 33%.
Acquisition background
Analysts believe that there are three reasons why the US government has approved Shuanghui’s acquisition of Smithfield: First, the United States needs foreign investment to promote U.S. economic growth and employment. At present, the U.S. economy is still recovering at a low speed. Although the unemployment rate has declined, it still stands at a high of 7.3%. Second, agriculture is not a sensitive area. If this transaction is not approved, it will greatly weaken the interest of foreign investors in the US market. In the end, Shuanghui promised to retain Smithfield’s management and staff and obtain support from labor organizations and local governments.
Acquisition announcement
On May 29, 2013, Shuanghui International Holdings Co., Ltd. and Smithfield Foods jointly announced that Shuanghui International will acquire Smithfield for a total price of US$7.1 billion.
According to the terms of the agreement, Shuanghui International will pay Smithfield $4.7 billion in cash and assume the latter’s debt of approximately $2.4 billion. Shuanghui International’s acquisition price is US$34 per share, a 31% premium over Smithfield’s May 28 closing price of US$25.97. Estimated at the closing price on May 28th, the market value of Smithfield is approximately $3.6 billion. Affected by the acquisition news, Smithfield’s opening price was $32.55 on May 29, local time, which was more than 25% higher than the closing price of the previous trading day.
Shuanghui International promises that after the acquisition, Smithfield will keep its operations unchanged, its management will remain unchanged, its brand will remain unchanged, its headquarters will remain unchanged, employees will not be laid off, factories will not be shut down, and it will continue to work with US producers, suppliers and farms. Cooperation.
Shuanghui International and Chairman of the Shuanghui Group, Wan Long, said that the acquisition is the combination of the largest pork companies in the two largest economies in the US and China, and it has concentrated the most advanced technologies, resources and talents, complement each other, and will form the largest in the world. Pork business.
