China’s Shuanghui International’s purchase of Smithfield Foods has been approved by United States government officials. Smithfield shareholders are scheduled to vote on the acquisition on Sept. 24. This is the largest acquisition of a U.S. company by a Chinese buyer.
The world’s largest pork processor, Smithfield, announced its proposed acquisition by Shuanghui in late May. The transaction is expected to hit around the $5 billion mark. Smithfield said the purchase would open more of the Chinese market to Smithfield products at a time when pork consumption is growing rapidly.
Procedure for a foreign company to purchase a U.S. company
When a foreign entity seeks to purchase a U.S. company, the deal undergoes a scrutinizing review by a governmental agency that is called the Committee for Foreign Investment (CFIUS) to do a thorough assessment for any potential national security impact.
Statements from the two food companies
“We are pleased that this transaction has been cleared by CFIUS, and we thank the Committee for its careful attention to this review,” Smithfield CEO Larry Pope said in a statement Friday.
In a statement, Shuanghui CEO Zhijun Yang said the two firms “have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company.”
Lawmakers have criticized the deal
The deal has resulted in criticism from some lawmakers as well as industry groups who have expressed concern about a Chinese company gaining the ownership of a major U.S. meat supplier. Skeptics have repeatedly raised concerns about the possibility of food safety standards being compromised when the company is owned by another company from out of country. Members of the Senate Agriculture Committee held a hearing this summer just to review whether foreign takeovers of American food producers were in the country’s best interests.
Shuanghui has had food control problems before
Shuanghui has struggled with food quality controversies in the past. The company was at the center of a Chinese television investigation into sales of pork produced with clenbuterol, a food additive banned in the United States, the European Union and China because of health risks. The company apologized and promised to revamp its safety regimen.
Under the terms of the agreement, Smithfield would retain its existing brands and operate as a wholly owned subsidiary of Shuanghui.
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