Chinese pork giant Shuanghui International Holdings Ltd., which agreed to acquire America's biggest pork producer Smithfield Foods, Inc. (SFD) last week, could raise its offer for Smithfield to march a superior offer that could emerges during the 30-day go-shop period, according to a Bloomberg report on Saturday.
Smithfield agreed on May 29 to be acquired by Shuanghui for $34 per share in an all-cash deal valued at about $7.1 billion, including the assumption of its net debt. The purchase price represents a premium of 31 percent over Smithfield's closing stock price on May 28, the last trading day before this announcement. The deal has the unanimous approval of the boards of directors of both companies.
Shuanghui is a Hong Kong-based holding company, which owns several global businesses that include food, logistics and flavoring products. The company and its subsidiaries are the majority shareholders of China's largest meat processing enterprise Henan Shuanghui Investment & Development.
The Shuanghui-Smithfield deal is still subject to antitrust clearances in the U.S., approvals from the Chinese government and from Smithfield shareholders. The deal is expected to close in the second half of 2013.
The deal provides Smithfield an opportunity to expand its offering to China through Shuanghui's distribution network, while also seeing Chinese expansion into the U.S. consumer goods market.
The go-shop period could reportedly see superior bids coming from Bangkok, Thailand-based Charoen Pokphand Foods plc or CP Foods, and Brazilian food processor JBS S.A., as both were in talks with Smithfield prior to the Shuanghui deal being struck.
However, the terms of the Shuanghui-Smithfield deal does not allow Smithfield to actively seek offers, but only respond to unsolicited bids that are superior to Shuanghui's.
Any superior bid received during the go-shop period could also be fallen back on in the event that the Shuanghui-Smithfield deal faces regulatory hurdles and does not go through. However, analysts' believe that regulatory hurdles are not likely to derail the deal. Meanwhile, a deal with CP Foods or JBS could face larger regulatory and financial hurdles.
Regulators in the U.S. have already shot down a few such large deals in the past few years where Chinese investors were trying to gain control of assets in the U.S.
Such large takeovers by foreign investors are normally cleared by the Treasury's Committee on Foreign Investment in the U.S. (CFIUS) after the reviews conducted by the DoJ, Defense and Homeland Security, as well as the FBI.
A recent proposed deal by Japan's third-largest mobile carrier SoftBank Corp. (SFTBY) to acquire Sprint Nextel Corp. (S) in a $20.1 billion deal has received approval from the CFIUS last week.
SFD closed Friday's regular trading session at $32.94, up $0.20 or 0.61% on a volume of 11.40 million shares.
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