President and chief executive of Smithfield Foods, Inc (NYSE: SFD), Larry Pope, sought to ease concerns among U.S. lawmakers, on Wednesday, over the proposed $4.7 billion acquisition of his company by China’s largest pork producer, Shuanghui International Holdings, saying the deal would boost U.S. exports while maintaining food safety standards and the competitiveness of the local pork industry.
It is unlikely that Congress will block the deal, but Senate Agriculture Committee Chairman Debbie Stabenow (D-Mich.) said, the Smithfield takeover may set off more Chinese acquisitions of U.S. food companies, adding: “At what point are we willing to say it’s not in America's interest to have our food processing industry owned by another country,” Reuters reported.
The purchase of Smithfield Foods, the world’s largest pork producer, which saw an annual turnover of $13 billion in 2012, by Shuanghui International, which generated $6.2 billion revenue in the same period, is the biggest Chinese takeover of a U.S. company to date.
The deal has ignited concerns about Chinese access to intellectual property such as agricultural technology and the long-term effect of U.S. agribusiness coming under the control of foreign corporations.
Stabenow said the fact that Shuanghui is willing to pay a 30 percent premium for Smithfield, which has been struggling to make a profit, “raises questions about the economic motivations of the purchase,” Reuters reported.
“Is Shuanghui focused on acquiring Smithfield's technology, which was developed with considerable assistance by U.S. taxpayers?” Stabenow asked.
Pope said his company would be the “same old Smithfield” after the takeover, adding that the deal is beneficial for the U.S., where pork exports would rise, and for China, where demand is surging for pork. He said a Chinese corporation gaining access to U.S. technology would not affect American pork industry’s market advantage or result in China sending pork to the U.S.
“Nothing's going to change. This is going to be an American company. We will continue to operate like an American company ... Regardless of where the ownership is, this company is going to have to operate under the laws of the United States. We're not operating under the laws of China,” Pope told a Senate panel, Reuters reported.
Sen. Mike Johanns (R- Neb.) said he was doubtful that the purchase of Smithfield would make China a major pork producer, but added that the takeover was fueling concerns in Congress, because the Chinese government would not allow a U.S. company to buy a Chinese pork producer.
“You know for a fact you could not do in China what they are doing here with Smithfield. Chinese regulators would laugh at you if you said, ‘Well, I'll just buy Shuanghui,’” Johanns was quoted as saying by Reuters.
Responding to questions from Sen. Sherrod Brown (D-Ohio), Pope admitted that the sale would benefit him significantly, but declined to reveal an exact figure.
“I don’t have those numbers right here in right in front of me ... I certainly am a significant shareholder. I’m going to receive the $34 per share that every other shareholder is going to receive,” and an additional compensation to hold back the current management team for three years, he said.
Pope is expected to receive nearly $46.6 million in payments -- about $28 million in cash and $18.8 million in equity -- as part of the planned takeover, Reuters reported, citing a filing made with the U.S. Securities and Exchange Commission last month.