In what is shaping up to be the largest takeover of a U.S. company by a Chinese buyer, Smithfield Ham – an icon in southern cooking – agreed to be bought out by Chinese meat producer Shuanghui International Holdings Wednesday.
Shuanghui – China's largest meat processor – will pay $34 a share to purchase Smithfield, 31 percent above the company's closing share price on Tuesday, according to a press release announcing the deal. The total purchase price is close to $5 billion.
Other brands under the Smithfield umbrella include Armour, Eckrich, and Healthy One. The company's history dates back to 1936 when the Luter family set up shop in Virginia.
"This is a great transaction for all Smithfield stakeholders, as well as for American farmers and U.S. agriculture," C. Larry Pope, Smithfield's chief executive, said in a statement. "With our shared expertise and leadership, we look forward to accelerating a global expansion strategy as part of Shuanghui."
But a recent series of food safety scandals in China could sour public opinion of the takeover Reuters reports, as news involving everything from tainted pork to sales of disguised rat meat remains fresh in mind.
"Food safety and environmental pollution are chronic problems in China and public anxiety over cases of fake or toxic food often spreads quickly," Reuters noted.
The deal also faces review by the U.S. Committee on Foreign Investment (CFIUS), which will determine if any national security risk exists in the takeover. The inquiry comes at a time when U.S./China relations remain tense, but if approved, the acquisition will be a landmark for Chinese efforts to expand their economic reach overseas.
Shanghui's purchase of Smithfield solidified what has been a "growing relationship" between the two companies over the past four years, Pope said in a conference call. It also further cements the relationship between China and the company's home state of Virginia. According to NPR, the state has sent several trade missions to Asia in recent years and exported almost $640 billion in agricultural products to China in 2012.
Smithfield's headquarters will remain in Virginia and the current management team will remain in place. There are no plans to shutter any Smithfield facilities. "It will be business as usual - only better - at Smithfield," Pope said. "We do not anticipate any changes in how we do business operationally in the United States and throughout the world."