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CFIUS approves Smithfield Foods sale to the Chinese

Shuanghui International Holdings Limited and Smithfield Foods, Inc. announced today that the companies have received clearance on their proposed transaction from the Committee on Foreign Investment in the United States.

The two companies made the announcement in a news release in which they also said they had received governmental merger clearance in Ukraine.

The sale of Smithfield, the world’s largest pork producer and processor, to Shuanghui International would be the largest sale of a U.S. company to the Chinese.

The transaction remains subject to Smithfield shareholder approval and other customary closing conditions, the companies said. Smithfield’s shareholders are scheduled to vote on the transaction at a special shareholders meeting on September 24.

“This transaction will create a leading global animal protein enterprise,” said Zhijun Yang, chief executive officer of Shuanghui International. “Shuanghui International and Smithfield have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company.”

Larry Pop

Larry Pope
Smithfield Chief Executive Officer and President C. Larry Pope added, “We are pleased that this transaction has been cleared by CFIUS, and we thank the Committee for its careful attention to this review.”

The inter-agency CFIUS process is managed by the Treasury Department.

Coincidentally, Assistant Secretary for International Markets and Development Marisa Lago announced today that she will participate in several engagements with U.S. and Chinese business leaders over the next few months in both countries “to build understanding of the CFIUS process.”

Her news release also noted, “As mandated by law, CFIUS has only one purpose: to review the potential national security effects of transactions through which a foreign investor could obtain control of a U.S. business. CFIUS does not consider broader economic or policy concerns when reviewing foreign investments, and applies the same rules to each transaction that it reviews, regardless of the nationality of the investor or the economic sector of the investment.”

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., and some other senators have questioned whether the sale of such a large food company raises national security concerns.

Sen. Debbie Stabenow, D-Mich.

Sen. Debbie Stabenow, D-Mich.
“It remains unclear what factors the committee took into account in making its decision,” Stabenow said today.

“We still do not know if the potential impact on American food security, the transfer of taxpayer funded innovation to a foreign competitor, or China’s protectionist trade barriers were considered,” Stabenow said.

“It’s troubling that taxpayers have received no assurances that these critical issues have been taken into account in transferring control of one of America’s largest food producers to a Chinese competitor with a spotty record on food safety. The Senate Agriculture Committee will continue examining the effectiveness of the review process for acquisitions such as this and take steps as needed to protect American interests in future transactions.”

Roger Johnson

Roger Johnson
National Farmers Union President Roger Johnson said he was disturbed by the decision.

“Today’s ruling by CFIUS on the proposed acquisition of Smithfield Foods by Shuanghui International is a disappointment for family farmers and ranchers across the United States,” he said. “The deal represents the sale of one-quarter of U.S. hog processing to a quasi-state-owned Chinese enterprise and is a dangerous precedent, in terms of food security and market competition.”

“We continue to urge Congress, the administration, and other decision-makers to oppose this sale. Our domestic livestock markets are already largely non-competitive and foreign-backed control will only make the situation worse,” Johnson said.