In what is potentially the largest-ever Chinese takeover of an American company, U.S. meat processor Smithfield Foods said Wednesday that it has agreed to be sold to China’s Shuanghui International Holdings Limited in a deal worth $7.1 billion, including assumed debt.
Shuanghui, which is China’s largest meat processor, will pay $34 in cash for each share of Richmond, Virginia–based Smithfield—a 31 percent premium over the target’s Tuesday closing price. The deal also includes the assumption of $2.4 billion of Smithfield debt.
Smithfield is the world’s largest pork processor and also owns a variety of packaged meat brands, including Eckrich, Farmland, and Armour. The deal is expected to close in the second half of this year, pending approval of Smithfield shareholders and regulators including the Committee on Foreign Investment in the United States.
The New York Times notes that the deal could face increased scrutiny due to China’s recent history of food-related scandals, including the discovery of thousands of dead pigs floating in a major river near Shanghai earlier this year. Meanwhile, the companies have promised that the point of the deal is to send Smithfield’s products to the Chinese market, which Reuters says has seen demand for U.S. meat skyrocket over the past decade. "Shuanghui will gain access to high-quality, competitively priced and safe U.S. products, as well as Smithfield’s best practices and operational expertise," Shuanghui chairman Wan Long said in a statement.
Smithfield also said in its announcement of the deal that the sale would result in no facility closures and that the company’s management team, including CEO C. Larry Pope, would remain in place.
Shuanghui has tapped Paul Hastings and Troutman Sanders as its legal counsel on the acquisition. Hong Kong–based corporate partner Raymond Li, chair of Paul Hastings’s Greater China practice, is leading a team from that firm. Also advising: Paul Hastings corporate partners Mario Ippolito, Jeffrey Pellegrino, and Garrett Hayes; litigation partners Hamilton Loeb, Charles Patrizia, Pierre Kirch, and C. Scott Hataway; employment law partners Todd Duffield, Erika Collins, and Stephen Harris; global M&A chair Carl Sanchez; M&A partner Vivian Lam; finance partner Michael Chernick; global trade partner Scott Flicker; real estate partner Thomas Mounteer; and tax partner Alexander Lee.
The Paul Hastings associates working on the deal are Donald Boyajian, Morgan Heavener, Edward Holmes, Ellen Holmes, Michael LaPlante, Laura McGurty, Fang Pei, Elizabeth Razzano, Dana Stepnowsky, Katherine Watlington, Devon Winkles, Felicia Yen, and Wilson Yiu.
Li led a Paul Hastings team advising Shuanghui last year on an asset restructuring that included a $2.5 billion general offer to acquire A-shares in subsidiary Henan Shuanghui Investment Development Co.
The Troutman team includes Richmond-based corporate partners R. Mason Bayler Jr., David Meyers, and Coburn Beck.
Simpson Thacher & Bartlett and McGuireWoods are advising Smithfield on the sale. Simpson’s team includes M&A partners Robert Spatt and Patrick Naughton, as well as employee compensation and benefits partner Andrea Wahlquist, tax partner Gary Mandel, IP partner Lori Lesser, banking and credit partner Alden Millard, environmental senior counsel Michael Isby, and corporate partners Shaolin Luo and Leiming Chen. Working on regulatory aspects of the deal are partners Kevin Arquit and Peter Thomas as well as senior counsel Michael Naughton, counsel Jayma Meyer, and associates Paul Sirkis and William Kearney.
Other Simpson associates on the deal are Jay Baviskar, Rachel Farnsworth, Brian Korchin, Seojung Park, Jakob Rendtorff, and Eric Wolf.
The firm represented underwriters in connection with a $1 billion debt offering by Smithfield last year. And Simpson advised the company on its $810 million purchase of rival pork producer Premium Standard Farms in 2006.
The McGuireWoods team working on the sale to Shuanghui is led by Richmond-based corporate partners David Oakey and James Anderson III, as well as Steven Kittrell, managing partner of the firm’s Washington, D.C., office. Smithfield’s chief legal officer is Michael Cole, a former McGuireWoods attorney. In 2008 the firm won a motion to dismiss an insurance coverage lawsuit filed in North Carolina against a group of Smithfield affiliates.
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