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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Secret Service Head: Breach Won't Happen Again

Julia Pierson tells a House panel investigating a recent intrusion at the White House: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
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
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.