Chinese meat producer Shuanghui Group has agreed to acquire leading global pork firm Smithfield Foods for about $4.7 billion.  If regulatory conditions are met, this could be the largest takeover of a U.S. company by a Chinese buyer to date.  Under the agreement, there will be no closures at Smithfield’s facilities and locations, and Smithfield’s existing management team will remain in place.  Upon closing of the transaction, Smithfield will become a wholly-owned independent subsidiary of Shuanghui International Holdings Limited, operating as Smithfield Foods.

Shuanghui agreed to pay $34 per share for Smithfield, marking a 31-percent premium to Smithfield’s closing price on Tuesday of $25.97.  Including debt, the deal values Smithfield at $7.1 billion.  “This is a great transaction for all Smithfield stakeholders, as well as for American farmers and U.S. agriculture,” said C. Larry Pope, Smithfield’s chief executive officer.

“We have established Smithfield as the world’s leading and most trusted vertically integrated pork processor and hog producer, and are excited that Shuanghui recognizes our best-in class operations, our outstanding food safety practices, and our 46,000 hard-working and educated employees.  It will be business as usual–only better–at Smithfield,” Pope said.

Shuanghui International is the majority shareholder of Henan Shuanghui Investment & Development company, which is China’s largest meat processing enterprise and China’s largest publicly traded meat products company as measured by market capitalization.

“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 U.S. products, as well as Smithfield’s best practices and operational expertise,” Shuanghui Chairman Wan Long said.

Yesterday’s “Daily Livestock Report,” published by Steve Meyer & Len Steiner, Inc. said that the merger will most likely enhance U.S. pork exports to China.  It makes sense for Shuanghui to own a U.S. company that will make things smoother for shipments.  If that occurs, other U.S. producers and packers will see higher prices and have an opportunity to increase output to back fill the domestic pork supply, the report said.  The merger may also push other U.S. firms to develop closer relationships in China, increasing U.S. exports event more.

U.S. hog and pork prices may increase in the short run if exports, in fact, grow.  However, those price increases will be temporary as long as U.S. producers are not limited by policy decisions, regulations, or higher costs in reacting to higher prices, the “Daily Livestock Report” concluded.