By: Henry T. Chou, Esq.
When first reported, the $4.7 billion acquisition of U.S-based Smithfield Foods by China’s Shuanghui International Holdings seemed like a win-win situation. American shareholders of Smithfield looked forward to receiving substantial payouts, while Shuanghui seemed to have gained access to meat processing capabilities to help meet the massive demand for pork in China.
Unexpectedly, however, opposition to the deal has surfaced, with U.S. food safety advocates claiming Americans could end up eating pork raised in China, which has looser health and safety rules than the U.S., and U.S. hedge fund managers arguing that Smithfield could have been sold to an American private equity firm for more money.
Opponents of the deal, including a coalition of agricultural and consumer safety groups, have so far as to request the U.S. Committee on Foreign Investment in the United States (CFIUS) to block the deal. It seems unlikely that CFIUS would block the deal, given that it usually only reviews transactions affecting national security, such as the transfer of sensitive technology that could be used for military purposes.
Nonetheless, the unexpectedly strong opposition to the transaction has gained the attention of politicians, who are exploring other avenues for blocking the deal. Senator Debbie Stabenow (D-MI) and other lawmakers have asked the U.S. Food and Drug Administration and the Department of Agriculture to review the transaction. It remains to be seen whether Shuanghui has the resolve to weather the political storm and complete the transaction.