The largest acquisition transaction of a US company by a Chinese company "suddenly" surfaced.
On May 29, 2013, Shuanghui International Holdings Co., Ltd. and Smithfield Foods (NYSE: SFD) jointly announced that Shuanghui International would acquire Smithfield for a total price of US$7.1 billion.
According to the terms of the agreement, Shuanghui International will pay Smithfield US$4.7 billion in cash and assume the latter's debt of approximately US$2.4 billion.
Shuanghui International's acquisition price is US$34 per share, a 31% premium to Smithfield's closing price of US$25.97 on May 28.
Based on the closing price on May 28, Smithfield's market value was approximately US$3.6 billion.
Affected by the news of the acquisition, Smithfield's opening price was $32.55 on May 29, local time, a surge of more than 25% from the closing price of the previous trading day.
Shuanghui International is the controlling shareholder of Shuanghui Development (000895), China's largest meat processing company and China's largest listed meat company. It is also the controlling shareholder of Shuanghui Group, the largest shareholder of Shuanghui Development.
Smithfield is the world's largest hog producer and pork supplier, and one of the largest suppliers of pork products in the United States.
An insider close to Shuanghui's development said, "This is a signal of Shuanghui's internationalization strategy. The pace of Shuanghui's internationalization may accelerate in the next step." The two companies have been in contact for a long time. According to the Smithfield website on May 29, 2013
According to a press release, Shuanghui International and Smithfield agreed to create a leading global pork production company through a strategic combination.
Shuanghui International promises that after the acquisition is completed, it will keep Smithfield's operations, management, brand, and headquarters unchanged. At the same time, it will not lay off employees or close factories, and will continue to work with American manufacturers, suppliers, and farms.
cooperate.
Smithfield said in a press release: "The combined company will not only have more opportunities to enter the huge and growing Chinese market, but also maintain world-leading food safety and quality control standards." Reuters quoted an insider
The deal is aimed at sending U.S. pork to China, the people said.
Wan Long, chairman of Shuanghui International and Shuanghui Group, said that this acquisition is a combination of the largest pork companies in the world's two largest economies, China and the United States. It concentrates the most advanced technology, resources, technology and talents, complements each other's advantages, and will form the world's largest pork company.
Pork business.
It is reported that the transaction has been unanimously approved by the boards of directors of both parties and is subject to approval by Smithfield shareholders.
In addition, the transaction is subject to approval by the Committee on Foreign Investment in the United States.
Subject to regulatory approvals and customary closing conditions, the companies expect the transaction to close in the second half of this year.
It is worth noting that on May 29, 2013, foreign media quoted people familiar with the matter as saying that according to the agreement, if the acquisition was aborted due to regulatory reasons, Smithfield would pay Shuanghui a "reverse breakup fee."
In 2005, China National Offshore Oil Co., Ltd. made an acquisition offer of more than US$18.5 billion for Unocal Petroleum Company of the United States. This was the largest overseas acquisition by a Chinese company at the time, but it ultimately failed due to domestic opposition in the United States and other reasons.
According to Reuters, a syndicate of Morgan Stanley and banks will provide loans for the transaction.
It is worth mentioning that the two major companies have been in contact before.
The aforementioned insider said that as early as two or three years ago, the boss of Smithfield came to Shuanghui Group.
Smithfield CEO Larry Pope said the company has been trying to do a deal with Shuanghui since 2009.
Information on the official marriage websites of the two major meat companies shows that Smithfield was founded in Virginia, USA, in 1936. In 2010, it had independent subsidiaries or joint ventures in 12 countries.
Smithfield experienced rapid development in the 1980s and by 1998 became the number one pork producer in the United States.
In 2010, the company was the world's largest hog producer and pork supplier.
In terms of production capacity, Smithfield has 4 pig farms, 850,000 breeding pigs, 40 pork processing plants, and a pig output of 15.8 million pigs. Its products are not only supplied to the United States, but also exported to China, Japan, Mexico and other markets.
Smithfield's fiscal year 2012 (ending April 29, 2012) sales were $13.1 billion and net income was $360 million.
In revenue, the pork division contributed $11.1 billion, the hog production division contributed $3.05 billion, and the international business division contributed $1.47 billion.
As of 2012, the company's debt was US$1.64 billion, with an asset-liability ratio of 33%.
According to information on Shuanghui Group's website, Shuanghui Group is a large food group mainly engaged in meat processing. It ranked 166th among the top 500 Chinese enterprises in 2011.
Shuanghui International's shareholders in 2010 were strong.