News / Economy

Chinese Firm Eyes Leading Pork Producer Smithfield's Know-how, Brands

Trucks make their way around the Smithfield Foods packaging plant in Smithfield, Virginia, May 30, 2013.
Trucks make their way around the Smithfield Foods packaging plant in Smithfield, Virginia, May 30, 2013.
Reuters
In three decades, Wan Long has turned Shuanghui International Holdings from a small, loss-making meat processor into China's largest, and is making his country's biggest takeover of a U.S. company - the $4.7 billion acquisition of Smithfield Foods Inc., the world's leading pork producer.
 
Along the way, the tough negotiating Wan, who also sits on the National People's Congress, China's legislature, has had the backing of Goldman Sachs, Singapore state investor Temasek Holdings and Wen Yunsong, or Winston Wen, son of former Premier Wen Jiabao, among others.
 
Wan, who is dubbed 'China's Chief Butcher', and Shuanghui's connection to Winston Wen gives the firm direct access to power brokers and key decision makers in Beijing through a powerful princeling stakeholder.
 
The ties with Wen are through private-equity firm New Horizon, which holds its stake in Shuanghui through two investment vehicles, according to a 2012 research report from China Investment Capital Corp.
 
While Wen stepped away from day-to-day operations at New Horizon three years ago - he left to work for China Aerospace Science & Technology Corp, and last year became chairman of China Satellite Communications Corp, according to media reports - he remains involved in the fund and derives income from its investments, people with knowledge of the matter told Reuters.
 
Shuanghui's acquisition of Virginia-based Smithfield Foods will face scrutiny by the Committee on Foreign Investment in the United States (CFIUS), a government panel that assesses national security risks. At least one member of Congress has said the deal raises alarms about food safety. Shuanghui was forced to recall its Shineway brand meat products from store shelves in China two years ago amid fears that some of it contained a banned feed additive.
 
Brands, know-how
 
Political scrutiny and cheaper pork supplies apart - average live hog prices in China are around a third higher than in the United States - much of the appeal for Shuanghui will be in Smithfield's technology, quality savvy and packaged meat business.
 
FILE - In this Sept. 6, 2011 file photo, shows a Smithfield ham at a grocery store in Richardson, Texas.FILE - In this Sept. 6, 2011 file photo, shows a Smithfield ham at a grocery store in Richardson, Texas.
x
FILE - In this Sept. 6, 2011 file photo, shows a Smithfield ham at a grocery store in Richardson, Texas.
FILE - In this Sept. 6, 2011 file photo, shows a Smithfield ham at a grocery store in Richardson, Texas.
The U.S. company owns well-known grocery store meat brands such as Eckrich, Armor and Farmland, which are likely to prove popular with Chinese consumers who consider foreign brands safer than many home-grown products.
 
“Shuanghui's expansion faces problems in developing its upstream [breeding] sector in accordance with food safety requirements,” said Liu Xiaofeng, an analyst with China Minzu Securities.
 
Shuanghui, which controls Shenzhen-listed Henan Shuanghui Investment & Development Co, China's largest meat processor, is one of China's few integrated meat producers, with farm-to-fork operations - but it only raises 400,000 of its own hogs a year, a fraction of the 11 million it needs, Liu said. This means the company, which has more than 61,000 employees, relies heavily on private breeders in a country where overcrowding on farms is commonplace, raising the risk of spreading disease.
 
Overcrowding on farms around Shanghai was the underlying factor that led to some 16,000 rotting pig carcasses floating down the Huangpu river earlier this year, according to official documents and interviews with local farmers.
 
Quality stamp
 
Shuanghui would likely be keen to obtain Smithfield's expertise in developing breeding farms that would help the Chinese firm establish a domestic product chain. It would also benefit from the U.S. company's quality control.
 
“Smithfield has very strong know-how on producing pork and bringing products to market in a very sophisticated market,” said Michael Boddington, managing director of Asian Agribusiness Consulting.
 
A recent report on the U.S. Meat Export Federation website about training seminars at large Chinese meat processors, including Shuanghui, noted some participants were unfamiliar with the proper use and handling of frozen raw materials.
 
“In some instances, we found that while the processing equipment was very modern, there was room for improvement in terms of maintenance and sanitation,” it said.
 
Based in the city of Luohe in the central Henan province, Shuanghui was set up by the local government in 1958. Wan was appointed as head of the firm in 1984 and steered it through a restructuring and a successful initial public offering in 1998.
 
After the local government sold its stake in 2006, Shuanghui transformed itself into its current complex corporate structure.
 
Shuanghui International is an offshore entity registered in Hong Kong, and is 5.2 percent invested by Goldman Sachs' main investing arm and 33.7 percent held by funds associated with China-focused private-equity firm CDH. New Horizon holds 4.2 percent, and Temasek 2.8 percent.

Related story on Smithfield, Virginia the location of Smithfield Ham headquarters:

Ham is Symbol of Virginia Towni
X
May 31, 2013 6:51 PM
In what would be the biggest takeover of a U.S. company by a Chinese buyer, Smithfield Ham -- an icon of the American food industry - has agreed to be acquired by Chinese meat processor Shuanghui International, though the deal must still be approved by regulators. Enming "Sean" Liu of VOA's Mandarin Service visited the town in Virginia where Smithfield Ham has its headquarters. Brian Allen narrates.

You May Like

Video For West Ukraine City, Conflict Far Away Yet Near

Physically and culturally close to Western Europe, Lviv feels solidarity with compatriots in country’s east but says they need to decide own future More

West African Women Disproportionately Affected by Ebola

Women's roles in families and the community put them at greater risk for contracting the disease, officials say More

Video NASA's MAVEN Spacecraft Arrives at Mars

Mars Atmosphere and Volatile Evolution craft will measure rates at which gases escape Martian atmosphere into space More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA’s MAVEN Probe Enters Mars Orbiti
X
September 22, 2014 9:20 PM
NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video NASA’s MAVEN Probe Enters Mars Orbit

NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video For West Ukraine City, Conflict Far Away Yet Near

The western Ukrainian city of Lviv prides itself on being both physically and culturally close to Western Europe. The Russian-backed separatists in the eastern part of the country are 1,200 kilometers away, and seemingly even farther away in their world view. Still, as VOA’s Al Pessin reports, the war is having an impact in Lviv.
Video

Video Saving Global Fish Stocks Starts in the Kitchen

With an estimated 90 percent of the world’s larger fish populations having already vanished, a growing number of people in the seafood industry are embracing the concept of sustainable fishing and farming practices. One American marine biologist turned restaurateur in Thailand is spreading the word among fellow chefs and customers. VOA Correspondent Steve Herman reports from Bangkok.
Video

Video Chinese Admiral Key in China’s Promotion of Sea Links

China’s President last week wrapped up landmark visits to India, Sri Lanka and Maldives, part of a broader campaign to promote a new “Maritime Silk Road” in Asia. The Chinese government’s promotion efforts rely heavily on the country’s best-known sailor, a 15th century eunuch named Zheng He. VOA's Bill Ide reports from the sailor’s hometown in Yunnan on the effort to promote China’s future by recalling its past.
Video

Video Experts Fear Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7768
JPY
USD
108.84
GBP
USD
0.6124
CAD
USD
1.0999
INR
USD
61.042

Rates may not be current.