Shuanghui International Holdings, the leading meat processor in China, has planned to sign a deal with Smithfield Foods, one of the most celebrated pork producers for $4.7 billion. The Smithfield Foods China deal is likely to be one of the biggest deals between the two leading meat processors of the world. Under the deal, Smithfield shareholders will receive an amount of $34 per share. This amounts to a 31% premium over the closing stock price of Smithfield at $25.07 last Tuesday. The shares of Smithfield closed at $33.35, up by 28% on Wednesday. The total value of the deal, including debt, was about $7.1 billion.
It is important to note, that Smithfield happens to be the largest producer to hog and pork processor, selling the packaged products under leading brands like Cook’s, Armour, Farmland and Smithfield. The Hong Kong-based company, Shuanghui, owns business, including flavouring products, logistics and food. This is a large shareholder of Henan Shuanghui Investment & Development, the biggest meat producer in China.
The Smithfield Foods Chinamerger has been approved by the boards of both these companies. However, the proposed deal is yet to be cleared by the US regulators and Smithfield shareholders. This includes the U.S. Committee on Foreign Investment, apart from other bodies. The committee is made up of representatives from agencies of the government. These include nine bodies, including the Treasury and the Justice Department and others.
The deal would be greatly profitable for Shuanghui, as it will bring a continuous supply of pork to the company. This is likely to give a boost to the overall productivity of the firm. China accounts for about 50% of the pork supply and consumption in the world, according to Tom Graves of S&P Capital IQ. China has been facing food concerns in recent years. The Smithfield Foods China deal will strengthen its supply mechanism in the years to come.