WASHINGTON — The purchase of U.S. pork giant Smithfield Foods by a Chinese meat processor was cleared Friday by the federal government, moving the controversial $4.7 billion deal a step closer toward being completed.
Smithfield said the Committee on Foreign Investment in the United States approved the purchase by Shuanghui International first announced by the companies in May.
The acquisition, which must still receive approval by Smithfield shareholders, would be the largest takeover of a U.S. company by a Chinese firm.
"We are pleased that this transaction has been cleared by CFIUS, and we thank the Committee for its careful attention to this review," Larry Pope, Smithfield's chief executive, said in a statement late Friday. The proposed buyout also received clearance from the Ukraine government, Smithfield said.
CFIUS has traditionally paid more attention to reviewing the impact that foreign purchases of American companies have on national security threats such as technology, telecommunications or national defense rather than food or agriculture.
The government panel is notorious for operating in secret and is not permitted by law to talk about or comment publicly on any transaction, largely because of the sensitive information it is given to review. CFIUS opened the Smithfield takeover to a 30-day review, before announcing in late July it would complete a second-phase lasting 45 days .
Smithfield shareholders are expected to vote on the takeover on Sept. 24. The deal is expected to close soon after, the companies said.
"This transaction will create a leading global animal protein enterprise," said Zhijun Yang, Shuanghui's chief executive. "Shuanghui International and Smithfield have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company."
CONCERNS: Smithfield workers wary over China deal
A remaining hurdle for the deal could come from an activist investor group that told Smithfield Foods shareholders this week it plans to vote against the deal as it works with interested buyers who may be willing to pay "substantially" more than the $34 a share offered by Shuanghui.
Starboard Value, which holds a 5.7% stake in Virginia-based Smithfield, has argued the world's largest pork processor and hog producer could command a higher price if the company was split into three parts — hog farms, pork sales and international operations — and then sold.
Under the Shuanghui deal, the company's board is only allowed to consider alternative merger proposals before that date, and must hold the meeting as scheduled unless it does not have enough support to approve the takeover, Starboard said.
Washington lawmakers have expressed concerns that the purchase of Smithfield by a Chinese company could squeeze U.S. pork supply as more of the meat goes overseas while leaving the U.S. susceptible to food safety concerns that have plagued Chinese companies, including Shuanghui. They also have worried that the acquisition would lead to additional takeovers of U.S. food companies by Chinese firms.
SMITHFIELD CEO: China deal won't hurt food safety
Debbie Stabenow, a Michigan Democrat who heads the Senate Agriculture Committee, said many questions remain about the deal.
"It remains unclear what factors the Committee took into account in making its decision," said Stabenow, whose Senate panel held a hearing in July to review the impact purchases of U.S. food companies by foreign groups have on the country.
"We still do not know if the potential impact on American food security, the transfer of taxpayer funded innovation to a foreign competitor, or China's protectionist trade barriers were considered," she said.
Founded in 1936 and based in Virginia, Smithfield sells packaged products under its own name and other popular brands, including Farmland, Armour and Cook's. The company employs more than 46,000 people in four countries and 25 states.
Shares of Smithfield ended regular trading down 4 cents at $33.92. The stock added 57 cents, or 1.7%, to $34.49 in after-hours trading.