Lawmakers skeptical of the proposed acquisition of Smithfield Foods Inc. (SFD:US) by a Chinese company grilled Chief Executive Officer C. Larry Pope on how the hog processor’s proposed $4.7 billion takeover would affect U.S. exports and security.
Ownership of the world’s biggest pork supplier by China’s Shuanghui International Ltd. will expand exports without harming U.S. food safety or economic competitiveness, Pope told the Senate Agriculture Committee yesterday, responding to the lawmakers’ concerns about potential risks. Chinese access to agricultural technology through the deal won’t lead to that nation eventually sending pig meat to the U.S., he said.
Still, the offer for the Smithfield, Virginia-based processor from Shuanghui, which would be the largest Chinese takeover of a U.S. company, fueled concerns over foreign access to intellectual property, less-strict product-safety rules and the broader effects of greater foreign ownership of U.S. agribusiness.
“There is a fair amount of cynicism and concern about this transaction,” Senator Heidi Heitkamp, a North Dakota Democrat, told Pope at the hearing. Once Shuanghui owns Smithfield, “will we then see that basically undermine pork production in our country? And that’s the concern.”
The deal would give Shuanghui control of 460 U.S. farms and contracts with more than 2,000 others, Pope said. Shuanghui and Smithfield voluntarily submitted the transaction announced May 29 to the Committee on Foreign Investment in the United States, a government body that reviews the national security implications of foreign investment.
“There should be no noticeable impact on how we do business operationally in America or around the world as a result of this transaction, except that we will do more of it,” said Pope.
A bipartisan group of senators, including Senate Agriculture Committee Chairwoman Debbie Stabenow, a Michigan Democrat, is urging CFIUS to include the U.S. Department of Agriculture and the Food and Drug Administration in its review to ensure experts on food supply and food safety are part of the process. Pope said at the hearing he had no objection to a USDA review.
Senate Mike Johanns, a Nebraska Republican, said several senators are frustrated that the U.S. is more open to takeovers of agriculture companies than is the government in China.
“There is something really offensive about the reality that they can do this here, but a very aggressive company like Smithfield, which has kind of redesigned pork production in the U.S., cannot do this in China,” said Johanns, a former U.S. Agriculture Secretary. “To us that is very, very difficult.”
Chinese investment in the U.S. this year may surpass the record set in 2012, according to the Rhodium Group LLC. Buyers from other foreign nations also are targeting U.S. companies: There were $13.1 billion of foreign takeovers of American food and agricultural companies announced in the first half of this year, according to data compiled by Bloomberg.
In 2012, companies announced deals valued at $23.6 billion, the most in at least 11 years, the figures showed. The 2012 total included the $4.6 billion takeover of Nebraska-based grain trader Gavilon Holdings LLC by Japan’s Marubeni Corp. (8002)
Concern about Chinese control over U.S. technology or the food supply may be overstated, said Senator John Boozman, an Arkansas Republican. Pork production is “a pretty stable industry,” he said. “There’s not a great mystery in the feed mix” or hog genetics that would give China a major edge, he said.
China is projected to pass Canada this year to become the biggest buyer of U.S. agricultural goods at $22 billion, according to the USDA.
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