Business & Economy
4:14 pm
Wed May 29, 2013

Smithfield Foods Goes 'Hog Wild' Over Shuanghui Merger

A hog farm.
Credit Jeff Vanuga, USDA NRCS

Leoneda Inge reports on the merger agreement between Smithfield Foods and China-based Shuanghui International.

The multi-billion dollar merger announcement between Smithfield Foods and China-based Shuanghui International caught many people by surprise.  Smithfield owns the largest hog processing plant in the world, in Tar Heel.  And thousands of hog farmers and factory workers in North Carolina are employed by the company.

If the deal clears regulatory hurdles, it could be the biggest takeover of a US company by a Chinese company.

Lamont Futrell has a hog farm in Wilson, North Carolina.  He won’t say how many hogs.  I caught up with him while he was listening to the news about Chinese meat producer Shuanghui agreeing to acquire Smithfield.  Futrell, produces or grows hogs for Smithfield, says he was surprised to hear the news and he's worried about the future of his business.

"Who would have expected the largest meat company in the United States to sell out to China," said Futrell.

Shuanghui is the largest meat producer in China. But Smithfield Foods says farmers like Futrell don’t need to worry.  Larry Pope is the President and CEO of Smithfield, headquartered in Smithfield, Virginia.  Pope says he’s keeping his job and so is Futrell.

“As part of this deal, Shuanghui has committed to investing in Smithfield to produce more food, more jobs and more value in the US which is good for business, good for our communities and good for American farmers and US agriculture.  In short this transaction is a win-win," said Pope.

Pope reiterated the “win” for farmers.

“This is great for American farmers.  Farmers should be standing up and cheering this deal.  This gives them access to the world’s largest market that has been difficult at times to access,” said Pope.

Access is key to connecting with the most populous country in the world.  Smithfield has been doing business with Shuanghui for years and currently exports pork products to a dozen countries.  The merger agreement states Shuanghui is willing to pay $4.7-billion for Smithfield – the total deal is valued at $7.1-billion.

Right now, North Carolina sells most of its pork to Japan - $286-million worth.  China is a distant second, for now.  Peter Thronton is assistant director of International Marketing for the state Agriculture Department.

“Japan is probably the best market in the world for North Carolina pork, however China is the big prize.  There is no greater demand in the world than in China,” said Thornton.

And if Smithfield is expected to produce more pork, there will be more hog waste.  That’s just one of the many problems that have faced the company over the years – from how it has treated its workers to how the animals are treated.  The National Humane Society of the US produced this video.

“Regardless of how the system is managed, these pigs are barely able to move even an inch their entire lives. They are unable to walk around, to turn around, causes them to quite literally to go insane,” narrated by Paul Shapiro of the National Humane Society.

In 2007, Smithfield agreed to phase out the so-called “gestation stalls” over a period of ten years.

Larry Pope says the merger agreement with Shuanghui promises to continue collective bargaining agreements with workers.  He says it also promises  environmental and technological advancements.

“I think it is a positive.  I know how most people react to that, the folks are selling out to the Chinese.  This is not selling out to the Chinese.  This is Smithfield being part of a global organization.  This guarantees the future," said Pope.

The deal is not complete – it still has to be approved by regulators.