Shares of Smithfield Foods Inc. (NYSE: SFD) skyrocketed on Wednesday after Chinese food processing company Shuanghui International also referred to as Shineway, said that it will acquire the world’s biggest pork producer in deal estimated at about $4.7 billion. The acquisition is by far the biggest ever done by a Chinese Company in the U.S.
According to the deal, Shuanghui, which is the biggest pork producing company in China, will pay $34 a share, representing a premium of 31% over the closing stock price on Tuesday.
The deal would also allow Smithfield to gain access in China, which is one of the world’s biggest consumers of pork. In order to counter slowing sales in other international markets, Smithfield was looking at ways to export its meat products in China.
Shuanghui, which is located in central China with factories spread across the mainland, is partly owned by an investment firm, owned by Goldman Sachs and is a parent company of Henan Shuanghui Investment & Development Company, listed on the Shenzen Stock Exchange since late 1990s. The Company also has presence in Japan and Korea.
The Chinese Company was under fire in 2011 when it was found that few of its farms fed the cattle containing certain chemical deposits which are considered hazardous for humans.
The deal is expected to close by the second half of this year, provided it gets approval from the Committee on Foreign Investment in the United States and Smithfield shareholders.
Commenting over the deal, Smithfield’s CEO, Larry Pope said in a statement, “This transaction preserves the same old Smithfield, only with more opportunities and new markets and new frontiers …This is not a strategy to import Chinese pork into the United States … this is exporting America to the world.”
While Smithfield was advised by Barclays and law firms McGuire Woods and Simpson Thacher & Barlett, Shuanghui received legal advice by law firms Paul Hastings, Troutman Sanders and investment bank, Morgan Stanley.
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