Smithfield deal passes US security check

Updated: 2013-09-10 07:00

By Michael Barris in New York and Wang Zhuoqiong in Beijing (China Daily)

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Some analysts have said the deal, if approved, could pave the way for more transactions tied to an ambitious new effort by Beijing to obtain raw materials and technology needed to run its fast-growing economy. China's rapid development into the world's second-largest economy has been accompanied by problems in food security and safety, as well as challenges in environmental pollution, healthcare and other issues.

The deal is expected to pass muster with Smithfield shareholders, despite a major stakeholder's opposition. Activist hedge fund Starboard Value LP, which holds a 5.7 percent interest in Smithfield, has vowed to vote against the acquisition in an effort to buy time to find a more lucrative deal.

The hedge fund has said it has held talks with potential rival suitors who would pay "substantially" more than Shuanghui's cash bid. Starboard has argued that the company would get a better offer for Smithfield if it were broken into three parts - US pork production, hog farming and international sales of fresh and packaged meats - and then sold.

Under the acquisition agreement, Smithfield is allowed to delay the upcoming special shareholders' meeting if it lacks sufficient votes to approve the acquisition.

Analyst Jim Fink told China Daily last week that he doubted that Starboard has the voting power to delay the meeting because 6.1 million of its 8 million shares are non-voting call options. Starboard and Smithfield did not return calls for comment on Fink's claim.

Yuan Song, an analyst at China-America Commodity Data Analytics Inc based in Wuhan, said after the deal Shuanghui could import high-quality and safe pork from the US to meet the rapidly increasing domestic appetite for high-end products.

He said one of the major drivers for Smithfield is to get into the Chinese market.

Wang Xiaoyue, an analyst , disagreed, adding that the deal is less likely to boost China's meat imports.

"Domestic supply is sufficient," he said. "There is no need to grow the imports."

But he said Shuanghui will benefit from its merger in lifting its brand recognition and technology know-how.


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