Shuanghui International Holdings has agreed to buy Smithfield Foods Inc. for $5 billion, which would be the largest ever acquisition of a U.S. company by a Chinese company, and some expect it could lead to more future Chinese acquisitions of U.S. companies.
Smithfield will become a wholly owned independent subsidiary of Shuanghui International, operating as Smithfield Foods, once the deal is completed. C. Larry Pope is expected to continue as Smithfield’s president and CEO, and the management teams and workforces of Smithfield’s companies are expected to remain intact.
Although the deal has raised concern in Washington among politicians, the deal must still be reviewed and approved by the Treasury’s Committee on Foreign Investment in the United States, known as CFIUS, which many say is more of a procedural than regulatory review.
“I don’t think the Smithfield deal will have problems,” David Marchick, who leads private equity firm Carlyle Group LP’s government, public and regulatory affairs, told Reuters. “It’s not a sensitive sector. They are keeping American management. And the U.S. agricultural community would love to export more to China. Most Chinese acquisitions in the U.S. will not encounter regulatory or political challenges. Three or four deals a year do encounter problems – and garner all the attention.”
Some expect the Smithfield deal to face opposition on Capitol Hill, but Congress has no authority to block the deal. It can, however, exert political pressure and cause delays.
“I do think it’s helpful to get a large transaction with a Chinese buyer through,” said Adel Aslani-Far, global co-chair of the M&A practice at Latham & Watkins. “It’s a shot in the arm to the deal economy and to attitudes about Chinese deals. Something sizable like this could be a very good sign to the market that the conditions are right here and will encourage further Chinese investment into the U.S.”
Smithfield shares were trading at around $32.94 on Friday, 3.1 percent below the $34 per share offered by Shuanghui.
