Tags: chinese | smithfield | foods | cfius

Capitol Hill, CFIUS Probing Chinese Purchase of Smithfield Foods

Image: Capitol Hill, CFIUS Probing Chinese Purchase of Smithfield Foods

By    |   Sunday, 09 Jun 2013 10:22 AM

Concerns about a Chinese company's planned $4.7 billion buyout of U.S. pork company Smithfield Foods are growing on Capitol Hill, with a little-known government panel joining in the scrutiny of the takeover plans.

The government's Committee on Foreign Investment (CFIUS) investigates concerns about U.S. companies being purchased by foreign interests, including the impact the buyouts have on national security, reports USA Today.

By law, it's not permitted to comment publicly on any transaction, including Shuanghui International's buyout of Smithfield, but the fact that it's investigating the move raises new questions about the sale.

"The fact that this merger is being talked about in the context of CFIUS is indicative of how sensitive investors are with China in that you would want to get the review and approval of this out of the way, up front," said Josh Zive, a senior counsel for Bracewell & Giuliani, who has represented companies in the CFIUS process in the past.

The government panel is headed by the Treasury secretary and includes representatives from the departments of Justice, Homeland Security, and Energy, along with five other agencies.

Senate Agriculture Chairwoman Debbie Stabenow said she is also concerned about the buyout, which if completed would be among the largest Chinese acquisitions of a company in the United States.

Stabenow, a Michigan Democrat, said that the agencies responsible for approving the merger should take into account "China and Shuanghui's troubling track record on food safety, and do everything in their power to ensure our national security and the health of our families is not jeopardized,"Fox News reports.

CFIUS does not reject deals outright, but can recommend that President Barack Obama block the deal. The panel can also require that certain jobs go to U.S. citizens or that sensitive parts of the company can be overseen by an American citizen who works with the government.

The panel has caused other large mergers to be abandoned in the past, including China's Huawei's plans to buy U.S. cloud-computing company 3Leaf Systems.

Smithfield CEO Larry Pope said his company plans to file its merger for CFIUS scrutiny "out of an abundance of caution."

Smithfield was founded in 1936, and says it has grown as large as it can in the U.S. market. The company already ships meats to Asian countries, but a merger with Shuanghui will give it access to millions more customers.

But the growing concerns on Capitol Hill could also jeopardize the deal. In 2005, widespread opposition forced China's state-owned oil company, CNOOC, to back away from its $18.5 billion buyout of California's Unocal before CFIUS finished the review.

Stabenow last week noted that China's entire food system has been plagued by reports of contamination, including thousands of dead hogs found floating down the Huangpu River in Shanghai earlier this year.

Other lawmakers, including Republican Sen. Charles Grassley of Iowa, Democratic Rep. Rosa DeLauro of Connecticut, and Republican Rep. Randy Forbes of Virginia have also voiced concerns.

Grassley said the deal could push family farmers and producers out of competitive markets, and wants the deal reviewed by the Justice Department and CFIUS.

Steve Meyer, president of Iowa-based Paragon Economics, said that Smithfield's hogs will still come from the United States, as well the jobs.

“A Chinese company will own it, but everything is geographically here," he said.
The deal is also coming as lawmakers have introduced legislation to stop China and other countries from artificially manipulating the value of their currency to give their companies an unfair advantage internationally.
 


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Concerns about a Chinese company's planned $4.7 billion buyout of U.S. pork company Smithfield Foods are growing on Capitol Hill, with a little-known government panel joining in the scrutiny of the takeover plans. The government's Committee on Foreign Investment (CFIUS)...
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2013-22-09
Sunday, 09 Jun 2013 10:22 AM
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