COFCO Ltd, China's largest national agricultural trading and food processing company, will buy a 4.95 percent stake in Smithfield Foods Inc, the largest pork producer in the US, mainly because it wishes to acquire the technology and management skills of the US company.
A spokesman for COFCO yesterday confirmed earlier reports of the deal and said his company has offered to buy up to 7 million Smithfield shares at a price to be fixed in the issue of Smithfield's convertible senior notes at a later date.
Smithfield said in a statement on the company's website that it plans to use the proceeds of the share sale to repay debts and for other general corporate purposes.
Once the deal goes through, Ning Gaoning, COFCO's chairman, is expected to be elected to the board of directors of the US company.
Smithfield's stocks yesterday closed at $19.88 on the New York Stock Exchange, valuing the proposed deal with COFCO at about $139 million.
The purchase of a minority stake in Smithfield is part of COFCO's investment strategy, said the Chinese company's spokesman. "What we have proposed to buy is not only the stocks in the company but also its advanced technology and management skills," he said.
The acquisition comes at a time when COFCO is planning to invest billions of yuan in a pig farm project. "It's important for us to introduce top technology and management skills," the spokesman said.
Ning was quoted on the Smithfield website as saying: "Smithfield is the world's largest producer and processor of pork. We look forward to building on our existing commercial relationship and exploring growth opportunities in China's food industry together."
Smithfield said it welcomes COFCO's investment in its company. "I am very pleased that COFCO has agreed to make this equity investment in Smithfield. We have been working closely together and this investment represents a significant step in cementing our relationship in the long term," stated C. Larry Pope, Smithfield's president and CEO.
"COFCO is a widely respected leader in China's food and agriculture industry," Pope said. "China is experiencing rapid growth in pork consumption and consumes more pork than the rest of the world combined. COFCO has introduced Smithfield to many opportunities in China and we look forward to continue working together."
Virginia-based Smithfield Foods is the leading processor and marketer of fresh pork and packaged meat in the US as well as the largest producer of hogs.
(China Daily July 2, 2008)