Shuanghui
and Smithfield
Shuanghui
international holdings Ltd is the leading producer of pork in China. In 2013,
the firm agreed to acquire Smithfield Foods Inc. (SFD) for the cost of $4.72
billion in an attempt of boosting the supplies of the nation in meat
consumption. According to reports from
the Forbes Magazine, this acquisition is an illustration of how the Chinese
market is moving from the natural resources and engulfing American and European
consumers (Backaler, 2014). The acquisition of Smithfield, which is the
world’s leading hog producer that brings approximately 15.8 billion of the
animals marketed annually depicts the inevitable intrusion of the Chinese in
the market of food supply. According to Smithfield website, the company owns
460 farms and contracts 2,100 other firms across several states in the United
States (Investors.smithfieldfoods.com, 2014).
There
are several financial consideration that were involved in the merger and
acquisition. Debt is a key consideration
in any takeover. The acquisition of Smithfield Inc. by the Chinese company is
one of the largest American takeovers and the valuation including debt is
estimated to be $7.1 billion (Investors.smithfieldfoods.com,
2014). Such a takeover is open to investigation by the Foreign
Investment Committee. This is due to the increased risks in the foods supply
chain in the American economy being left in the hands of a foreign. The issue
of how the takeover will be financed is a major question. According to reports in the Bloomberg, before
the regular trading in New York, Smithfield sales rose by 24% totaling to
$32.31 per share (McCracken, 2013). The
takeover will be funded by a rollover of the existing debt of Smithfield, cash,
and a commitment of the debt to Morgan Stanley and a group of banks. However,
the management team of Smithfield will remain, and the takeover depends on
approval of regulators and shareholders in Smithfield.
References
Backaler, J. (2014). After Alibaba's IPO, Key Questions
About Its International Expansion. Forbes. Retrieved 1 October
2014, from http://www.forbes.com/sites/joelbackaler/2014/09/07/after-alibabas-ipo-key-questions- about-its-international-expansion/
Investors.smithfieldfoods.com,.
(2014). Shuanghui
International and Smithfield Foods Agree to Strategic
Combination, Creating a Leading Global Pork Enterprise (NYSE:SFD). Retrieved 1 October 2014, from http://investors.smithfieldfoods.com/releasedetail.cfm?releaseid=767743
McCracken, S. (2013). Shuanghui Agrees to Acquire
Smithfield Foods for $4.72b. Bloomberg.
Retrieved 1 October 2014, from http://www.bloomberg.com/news/2013-05- 29/shuanghui-group-said-to-near-agreement-to-buy-smithfield-foods.html
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