With big-name backers, Chinese firm eyes Smithfield's know-how, brands

Thu May 30, 2013 9:57am EDT
 
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By Kazunori Takada and Dominique Patton

SHANGHAI/BEIJING (Reuters) - In three decades, Wan Long has turned Shuanghui International Holdings from a small, loss-making meat processor into China's largest, and is making his country's biggest takeover of a U.S. company - the $4.7 billion acquisition of Smithfield Foods Inc SFD.N, the world's leading pork producer.

Along the way, the tough negotiating Wan, who also sits on the National People's Congress, China's legislature, has had the backing of Goldman Sachs (GS.N: Quote), Singapore state investor Temasek Holdings TEM.UL and Wen Yunsong, or Winston Wen, son of former Premier Wen Jiabao, among others.

Wan, who is dubbed 'China's Chief Butcher', and Shuanghui's connection to Winston Wen gives the firm direct access to power brokers and key decision makers in Beijing through a powerful princeling stakeholder.

The ties with Wen are through private equity firm New Horizon, which holds its stake in Shuanghui through two investment vehicles, according to a 2012 research report from China Investment Capital Corp.

While Wen stepped away from day-to-day operations at New Horizon three years ago - he left to work for China Aerospace Science & Technology Corp, and last year became chairman of China Satellite Communications Corp, according to media reports - he remains involved in the fund and derives income from its investments, people with knowledge of the matter told Reuters.

Shuanghui's acquisition of Virginia-based Smithfield Foods will face scrutiny by the Committee on Foreign Investment in the United States (CFIUS), a government panel that assesses national security risks. At least one member of Congress has said the deal raises alarms about food safety. Shuanghui was forced to recall its Shineway brand meat products from store shelves in China two years ago amid fears that some of it contained a banned feed additive.

BRANDS, KNOW-HOW

Political scrutiny and cheaper pork supplies apart - average live hog prices in China are around a third higher than in the United States - much of the appeal for Shuanghui will be in Smithfield's technology, quality savvy and packaged meat business.   Continued...

 
An employee works inside a Shuanghui factory in Zhengzhou, Henan province March 15, 2013. REUTERS/Stringer