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China’s billion-dollar bid for US pork processor Smithfield spells exit for investors

30 May 2013

China’s Shuanghui International Holdings has agreed to acquire Smithfield Foods, the world’s largest pork processor, for $7.1bn, including debt.

The acquisition of the US-based, NYSE-listed company will lead to an exit for a handful of private investment groups. Investors in Smithfield include Chinese private equity firm CDG and Singapore sovereign wealth fud Temasek, with respective 33.7 per cent and 2.8 per cent stakes. Golman Sachs also currently holds a 5.2 per cent stake.

The deal has been unanimously approved by the boards of directors of both companies, and will see Shuanghui acquire all of the outstanding shares of Smithfield for $34 per share in cash, a premium of approximately 31 per cent over Smithfield’s closing stock price on 28 May.

Shuanghui chairman Wan Long said, “The acquisition provides Smithfield the opportunity to expand its offering of products to China through Shuanghui’s distribution network. Shuanghui will gain access to high-quality, competitively-priced and safe US products, as well as Smithfield’s best practices and operational expertise. We were especially attracted to Smithfield for its strong management team, leading brands and vertically integrated model.”

Shuanghui International Holdings is a Hong Kong-based holding company, which owns businesses that include food, logistics and flavoring products. It is the majority shareholder of China’s largest meat processing enterprise, which is publicly traded as Henan Shuanghui Investment & Development on the Shenzhen Stock Exchange.

The deal is the largest Chinese prospective investment in a US company since state-backed energy group CNOOC made an $18bn bid for petroleum exporter Unocal in 2005, Reuters noted, though the deal did not go ahead due to political pressure.

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