Skepticism surrounding the proposed $4.7 billion acquisition of Smithfield Foods, Inc (NYSE: SFD) by China’s largest pork producer, Shuanghui International Holdings, has taken a new turn as concerned U.S. lawmakers wrote to Smithfield, on Wednesday, seeking information on how the takeover would affect the safety and availability of heparin -- an anticoagulant derived from pig intestines.
In a letter to Larry Pope, the president and chief executive of Smithfield, members of the House Energy and Commerce Committee asked the company to hand over information related to its production of crude heparin, which is used in the manufacture of the blood-thinning drug.
“The committee’s investigation indicates that the U.S. heparin supply is stressed, and could well be in shortage. China’s heparin market is experiencing its own pressures, and Smithfield Foods under Shuanghui control may be pressured to export its crude heparin product to China instead of supplying U.S. companies,” lawmakers said in the letter.
“The impact of this pending acquisition on the availability of U.S. heparin is critical. Heparin is still widely used for heart surgery and dialysis patients,” the letter said, adding that the U.S. Food and Drug Administration, or FDA, had earlier linked the contamination of heparin supply in the U.S. to “intentional adulteration during manufacture of heparin in China.”
The lawmakers said they were “further troubled by the linkage of Shuanghui to the clenbuterol scandal” that occurred in China when the illegal use of clenbuterol in porcine feed to accelerate the growth of livestock, between 1998 and 2007, led to widespread food poisoning.
The instances of contamination connected with Shuanghui’s business practices in the past “heightens our concerns of how Smithfield Foods will be able to maintain the safety of its heparin products should distribution of crude heparin be maintained in the U.S.,” the lawmakers said, adding that they require responses to the queries no later than Aug. 7.
An FDA probe -- that began in early 2008 after reports of serious reactions to heparin in the U.S., including some deaths -- found a contaminant in heparin supplied by Baxter International Inc. (NYSE:BAX) and traced its origin to crude heparin produced in China.
The letter to Pope was sent weeks after he addressed the Senate Agriculture Committee, on July 10, over concerns regarding the purchase of Smithfield by Shuanghui, fueling concerns about Chinese access to U.S. intellectual property and the long-term effect of U.S. agribusiness coming under the control of foreign companies.
Smithfield and Shuanghui filed their proposal, in June, to the Committee on Foreign Investment in the United States, or CFIUS, which clears foreign investment proposals within 30 days, although some proposals are subjected to an additional 45-day scrutiny.
Smithfield, on Wednesday, said that the company had been notified by CFIUS about a second-phase, 45-day review of the transaction, but did not reveal any further details on the process due to its confidential nature.