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

    Candidates' Comments Fly Like New Hampshire Snowflakes

    Four days ahead of the country's first-in-the-nation Republican and Democratic party primary elections, surveys show the parties' contests tightening

    Australian Commander: IS Changing Tactics

    Head of Australian forces in Middle East talks with VOA about training Iraqi troops, countering evolving Islamic State efforts and defeating extremism

    UN Calls for Global Ban on Female Genital Mutilation

    Recent UNICEF report finds at least 200 million girls and women alive today have undergone female genital mutilation in 30 countries

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    German Artists to Memorialize Refugees With Life Jacket Exhibiti
    X
    Hamada Elsaram
    February 05, 2016 4:30 PM
    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video Former Drug CEO Martin Shkreli Angers US Lawmakers

    A former U.S. pharmaceutical business executive has angered lawmakers by refusing to explain why he raised the price of a life-saving pill by 5,000 percent. Martin Shkreli was removed from a congressional hearing on Thursday after citing his Fifth Amendment right to stay silent. Zlatica Hoke has more.
    Video

    Video Super Bowl TV Commercials are Super Business for Advertisers

    The Super Bowl, the championship clash between the two top teams in American Football, is the most-watched sporting event of the year, and advertisers are lining up and paying big bucks to get their commercials on the air. In fact, the TV commercials during the Super Bowl have become one of the most anticipated and popular features of the event. VOA's Brian Allen has a sneak peek of what you can expect to see when the big game goes to commercial break, and the real entertainment begins.
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Solar Innovation Provides Cheap, Clean Energy to Kenya Residents

    In Kenya, a company called M-Kopa Solar is providing clean energy to more than 300,000 homes across East Africa by allowing customers to "pay-as-you-go" via their cell phones. As Lenny Ruvaga reports from Kangemi, customers pay a small deposit for a solar unit and then pay less than a dollar a day to get clean energy to light up their homes or businesses.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.
    Video

    Video Apprenticeships Put Americans on Path Back to Work

    Trying to get more people into the U.S. workforce, the Obama administration last year announced $175 million in grants towards apprenticeship programs. VOA White House correspondent Aru Pande went inside one training center outside of Washington that has gained national recognition for helping put people on the path to employment.
    Video

    Video New Material May Reduce Concussion Effects

    As the 2016 National Football League season reaches its summit at the Super Bowl this coming Sunday (2/7), scientists are trying to learn how to more effectively protect football players from dangerous and damaging concussions. Researchers at Cardiff and Cambridge Universities say their origami-based material may solve the problem. VOA’s George Putic reports.
    Video

    Video Saudi Arabian Women's Sports Chip Away at Stereotypes

    Saudi Arabian female athletes say that sports are on the front line of busting traditions that quash women’s voices, both locally and internationally. In their hometown of Jeddah, a group of basketball players say that by connecting sports to health issues, they are encouraging women and girls to get out of their homes and participate in public life. VOA’s Heather Murdock reports.
    Video

    Video A Year Later, Fortunes Mixed for Syrians Forging New Lives in Berlin

    In April of last year, VOA followed the progress of six young Syrian refugees -- four brothers and their two friends -- as they made their way from Libya to Italy by boat, and eventually to Germany. Reporter Henry Ridgwell caught up with the refugees again in Berlin, as they struggle to forge new lives amid the turmoil of Europe's refugee crisis.
    Video

    Video Zika Virus May be Hard to Stop

    With the Zika virus spreading rapidly, the World Health Organization Monday declared Zika a global health emergency. As Alberto Pimienta reports, for many governments and experts, the worst is yet to come.

    World Currencies

    EUR
    USD
    0.8926
    JPY
    USD
    116.68
    GBP
    USD
    0.6871
    CAD
    USD
    1.3751
    INR
    USD
    67.653

    Rates may not be current.