Shuanghui International’s acquisition of Smithfield Foods Inc. (NYSE:SFD), the largest U.S. pork producer, will be financed jointly by Bank of China (HKG:3988) and Morgan Stanley (NYSE:MS), Reuters said Friday. Bank of China has provided up to $4 billion, and Morgan Stanley is adding $3 billion for the deal.
Shuanghui has agreed to pay $4.9 billion in cash to acquire Smithfield Foods and has also taken on the American meat processor’s outstanding debt, which amounts to $3.45 billion. If the deal is approved by the Committee on Foreign Investment in the United States, or CFIUS, it will become the biggest acquisition of an American company by a Chinese firm.
Earlier this week, Shuanghui International, which controls Henan Shuanghui Investment & Development Co. (SHE:000895), China’s largest meat processor, announced its plan to buy Smithfield Foods, which has a global herd of 1.09 million sows and raises close to 16 million hogs per year, according to Successful Farming magazine.
Bank of China is offering financing to Shuanghui in a syndicated five-year term loan. Morgan Stanley’s funding will similarly be in a term loan.
The acquisition highlights China’s growing appetite for foods such as pork as its people become wealthier overall and its middle class expands. Demand for U.S. meat in China has risen tenfold over the past decade, fueled in large part by frequent food safety scandals. In 2011, China became the third largest importer of U.S. pork.
Shuanghui International is an offshore entity registered in Hong Kong. Goldman Sachs’ Hong Kong investment arm owns 5.2 percent of the company, while funds associated with the China-focused private equity firm CDH own 33.7 percent. Another Chinese private equity firm New Horizon Capital holds 4.2 percent, and Singapore sovereign wealth fund Temasek holds 2.8 percent, Reuters reported Friday.
Sophie is a graduate of Northwestern University. She covers the emerging markets in Southeast Asia, with a particular interest in foreign investment in the region....