SMITHFIELD Foods announced July 24 that the Committee on Foreign Investment in the U.S. (CFIUS) will conduct a second phase of its review in the proposed acquisition of the company by China's Shuanghui International.
The 45-day review follows a mandated 30-day review period that commenced with Smithfield's June Securities & Exchange Commission filing detailing the proposed transaction.
CFIUS, an inter-agency committee created by statute and chaired by Treasury Secretary Jack Lew, is charged with reviewing proposed foreign acquisitions of U.S. companies to determine any potential national security concerns while still facilitating the country's policy of open investment. The statute allows for the additional 45-day review period.
Smithfield said it does not intend to comment further on the confidential CFIUS process but expects the deal to close in the second half of the year. The definitive agreement calls for Shuanghui to purchase Smithfield at a cash price of $34 per share; with assumption of associated Smithfield debt, the deal is valued at roughly $7 billion.
Last Wednesday, the House Energy & Commerce Committee sent a letter to Smithfield president and chief executive officer C. Larry Pope requesting information regarding the acquisition, specifically about the committee's ongoing investigation into heparin contamination. According to a committee statement, the acquisition "raises new concerns regarding the supply of heparin in both the U.S. and China and the potential threat of contamination."
The investigation dates back to 2008, when the Food & Drug Administration announced major recalls of heparin (produced from the mucosal tissues of pig intestines) due to contamination of raw heparin stock imported from China. According to FDA, the adulterated heparin killed 81 people in the U.S.
"China's heparin market is experiencing its own pressures, and Smithfield, under Shuanghui control, may be pressured to export its crude heparin product to China instead of supplying U.S. companies," the committee's letter pointed out. "Because the contamination case was never adequately addressed by Chinese authorities, at least some of the bad actors responsible for the adulteration presumably are still operating in the Chinese heparin business, and there is little deterrence against, but high economic gain for, new heparin contamination schemes, especially where there is inadequate traceability."
Heparin is widely used for heart surgery and dialysis patients, the committee explained, so the availability of U.S. heparin "is critical."
Earlier this month, Pope faced questions from the Senate Agriculture Committee regarding food safety and pressures on Smithfield in choosing between serving U.S. and Chinese customers under its proposed new ownership.