LONDON (Reuters) - The $4 billion loan backing Chinese pork producer Shuanghui International’s $4.7 billion bid for U.S. meat processor Smithfield Foods SFD.N has raised $5 billion from banks so far and could rise to $9 billion, banking sources said on Friday.
Rabobank, which specializes in food and agribusiness lending, was first to pledge a $1 billion underwriting and was followed by $1 billion commitments from Natixis, Royal Bank of Scotland and Standard Chartered Bank, the bankers said.
A further four banks - Credit Agricole CIB, DBS Bank, Industrial & Commercial Bank of China and ING Bank - are working on securing credit approval to join the deal, the bankers added.
The positive response by international banks comes as US lawmakers examine the deal, which will be the biggest acquisition of a U.S. company by a Chinese company if it goes ahead.
Shuanghui and Smithfield announced on May 29 that Shuanghui would acquire all outstanding shares of Smithfield for $34 per share in cash in a deal that values Smithfield at about $7.1 billion, including the assumption of Smithfield’s net debt.
Bank of China has been co-ordinating the $4 billion loan which comprises a $2.5 billion, three-year tranche and a $1.5 billion five-year tranche.
The three-year tranche pays an interest margin of 350 basis points (bps) over Libor and the five-year tranche pays 450bps.
Banks were invited to underwrite $1 billion each for all in pricing of 400bps on the three-year tranche and 500bps on the five-year tranche. Fees on the two tranches are 150 bps and 250 bps respectively.
Morgan Stanley is sole financial adviser to Shuanghui International.
Shuanghui International is the majority shareholder of Henan Shuanghui Investment & Development, China’s largest meat processing enterprise and the country’s largest publicly traded meat products company by market capitalization.
Smithfield is headquartered in Smithfield, Virginia. Its popular brands include Eckrich, Farmland, Healthy Ones and Armour.
Editing by Tessa Walsh