RICHMOND, Virginia (AP) -- Pork producer Smithfield Foods Inc. on Thursday completed its sale to Shuanghui International Holdings Ltd., the largest shareholder of China's biggest meat processor.
The $34 per share deal approved by shareholders earlier this week is the largest takeover of a U.S. company by a Chinese firm, valued at about $7.1 billion including debt. The Smithfield, Virginia, company's sale to Shuanghui comes at a time of serious food safety problems in China, some of which have involved Shuanghui, which owns food and logistics enterprises.
The deal marked a new era for the world's biggest pork producer and processor and would unlock growth opportunities in the Chinese market, said Smithfield CEO Larry Pope in a statement. He added that "(Smithfield) will continue to be defined by the strictest adherence to the highest standards of food safety and quality."
Smithfield Foods, whose brands include Armour, Farmland and its namesake, was founded in 1936. It has grown to annual sales of $13 billion and has about 46,000 employees.
Pork producers such as Smithfield have been caught in a tug of war with consumers. The company needs to raise prices to offset rising commodity costs, namely the corn it uses for feed. But shoppers are still extremely sensitive to price changes in the current economy. By raising prices, Smithfield risks cutting into its sales should consumers cut back or buy cheaper meats, such as chicken.
Smithfield has said that the buyout and China's growing demand for pork will be a boon for American agriculture and an opportunity to export to new markets. Smithfield's existing management team will remain in place and Shuanghui also will honor labor agreements with Smithfield workers.
The acquisition highlights what could be growing interest in American food by Chinese consumers. Foreign food, such as milk powder from New Zealand and vegetables from neighboring Asian countries, is prized by Chinese consumers because of the frequent domestic food safety scandals.
In one of the most notorious incidents, six babies died and 300,000 were sickened in 2008 from drinking infant formula and other dairy tainted with the industrial chemical melamine. And Shuanghui's reputation was battered in 2011 when state broadcaster CCTV revealed its pork contained clenbuterol — a banned chemical that makes pork leaner but can be harmful to humans.
Earlier this month, a U.S. committee that reviews mergers between American and overseas companies for national-security implications cleared the deal.
Some U.S. lawmakers had questioned the transaction, convening a Senate Agriculture Committee hearing in July to discuss the deal.