PEKING (dpa-AFX) - Packaged pork and meat products maker Smithfield Foods, Inc. (SFD), which is being acquired by Chinese pork giant Shuanghui, announced Wednesday that President and CEO Larry Pope will testify later in the day before the U.S. Senate Committee of Agriculture, Nutrition and Forestry to reaffirm the benefits of the Shuanghui-Smithfield deal for U.S. farmers and agriculture. Pope will also reaffirm his commitment to uphold the highest food safety standards.
Virginia-based Smithfield, the world's biggest pork processor, agreed on May 29 to be acquired by Hong Kong-based Shuanghui International Holdings Ltd. for $34 per share in an all-cash deal valued at about $7.1 billion, including the assumption of its debt.
Under the deal that was approved by the boards of directors of both companies, Shuanghui will acquire all outstanding shares of Smithfield for $34 per share in cash, representing a 31 percent premium over Smithfield's closing stock price on May 28, the last trading day prior to the announcement.
At the Senate meeting, Pope will explain the increased opportunities for U.S. farmers and agriculture in exports to meet the growing Chinese demand, with Shuanghui agreeing to maintain all of the contracts and arrangements that Smithfield Foods has with more than 2,000 family farmers across the country.
Pope will also reaffirm his commitment to maintain integrity of Smithfield's brands, its record of safety, the safety of the U.S. food supply chain and the U.S. food safety standards.
Further, Pope will emphasize that Shuanghui has agreed to retain Smithfield's operations, staff and management team as they are recognized by Shuanghui as best-in-class operations, with outstanding food safety practices and 46,000 hard-working employees.
Pope will underline the fact that there is expected to be no noticeable change in how Smithfield operates in the U.S. and globally as a result of the deal, except that the volumes will increase.
Smithfield noted that the deal is already receiving broad-based support from local, state and national elected officials, industry labor unions, U.S. hog farmers, leading economic and international affairs academics and even U.S. based food industry peers.
Shuanghui is a Hong Kong-based holding company that owns several global businesses including food, logistics and flavoring products. The company and its subsidiaries are the majority shareholders of China's largest meat processing enterprise Henan Shuanghui Investment & Development.
However, the deal has been facing some road blocks for some time from two of Smithfield's large shareholders, activist hedge fund Starboard Value LP and Continental Grain Co. The two shareholders are proposing several options instead of the Shuanghui takeover in order to unlock value and improve shareholder returns.
Starboard has been calling for breaking up the company and selling it in parts. Meanwhile, Continental has, even before the deal, been pushing for splitting Smithfield into three independent companies by selling the underperforming and highly volatile Hog Production as well as select European assets, and reinvesting the proceeds from asset sales in additional share buybacks.
The deal could also see resistance for regulators in the U.S., who have already shot down a few such large deals in the past few years where Chinese investors were trying to gain control of assets in the U.S.
Such large takeovers by foreign investors are normally cleared by the Treasury's Committee on Foreign Investment in the U.S. (CFIUS) after the reviews conducted by the DoJ, Defense and Homeland Security, as well as the FBI.
SFD closed Wednesday's regular trading session at $32.84, down $0.02 or 0.06% on a volume of 4.50 million shares.
Copyright RTT News/dpa-AFX