DESPITE the fact that the Shuanghui International Holdings Ltd. acquisition of Smithfield Foods Inc. would be the largest-ever Chinese acquisition of U.S. assets, it's likely that the deal will be approved by U.S. regulators, including The Committee on Foreign Investment in the United States (CFIUS), according to economists and trade officials.
The committee reviews such acquisitions to determine if they pose a risk to national security, such as a deal that would hand over sensitive intelligence or technology to a foreign nation.
However, Smithfield is a food producer, and food is considered a less-significant component of national security, according to an article in The Wall Street Journal last week that cited sources who understand how CFIUS reviews takeover proposals.
Additionally, food produced in and imported into the U.S. is regulated by the U.S. Department of Agriculture and Food & Drug Administration; Smithfield would retain its American managers, and Shuanghui is a privately owned Chinese company, not a state-controlled interest, the newspaper reported.
Nevertheless, political pressure in the U.S. could sway CFIUS, and a number of politicians were speaking out last week, calling for "robust analysis" to ensure environmental standards, food safety, national economic interests and the safety and security of American people.
Smithfield, on a conference call last week, said this is why the agreement includes a breakup fee that would call for Shuanghui to make a payment to Smithfield if the deal does not go through. The company did not say how large the fee is.
Smithfield chair Joseph Luter III also said other bidders for the company may come forward.