Shuanghui, China’s largest pork producer, has acquired Smithfield Foods, the world’s largest producer of the white meat, for $4.7bn, making this the biggest Chinese acquisition of a US company to date.
The deal will make Smithfield’s long-suffering shareholders happy but mega-mergers of this scale are fraught with problems and hoped-for synergies may prove elusive, not least because of the clash of two very distinct corporate cultures.
Not surprisingly, the two companies argue otherwise and see the deal allowing Smithfield to increase US pork exports to China, which already account for a quarter of the US giant’s exports by volume.
Shuanghui plans to launch new, premium pork products targeted at China’s growing middle class and made of meat produced in the US. This demographic “has a huge demand for healthy, high-quality food,” Zhijun Yang, Shuanghui’s chief executive, told the Wall Street Journal.
Shuanghui hopes the deal will improve productivity of its Chinese plants and claims it wants to learn from the Virginia-based company in areas of food safety and production technology.
Smithfield has long been a target for the US animal rights lobby and has historically had a pretty bad environmental reputation, which it has sought to improve in recent years.
Shuanghui also has a “troubling track record on food safety”, according to a US Senate committee which debated the wisdom of allowing the country’s largest pork producer to fall into Chinese hands before finally relenting.