Shuanghui International has agreed to acquire US-based pork producer and processor Smithfield Foods in an all-cash deal valued at $7.1bn, including the assumption of net debt.
Shuanghui International is the majority shareholder of Henan Shuanghui Investment & Development, which is a leading meat processing company in China.
Under the terms of the deal, Shuanghui will acquire all of the outstanding shares of Smithfield for $34 for each share of common stock. The purchase price represents a premium of approximately 31% over Smithfield's closing stock price on 28 May 2013.
The deal will be funded through a combination of cash provided by Shuanghui, rollover of existing debt, and debt financing that has been committed by Morgan Stanley Senior Funding and a syndicate of banks.
Smithfield president and chief executive officer Larry Pope said: "With our shared expertise and leadership, we look forward to accelerating a global expansion strategy as part of Shuanghui."
Shuanghui chairman Wan Long said that the acquisition provides Smithfield the opportunity to expand its offering of products to China through Shuanghui's distribution network. Shuanghui will gain access to high-quality, competitively-priced and safe U.S. products, as well as Smithfield's best practices and operational expertise.
Barclays and Morgan Stanley are acting as financial advisors, Simpson Thacher & Bartlett and McGuireWoods and Paul Hastings and Troutman Sanders are serving as legal counsel to Smithfield and Shuanghui respectively.
Following the completion of the deal, Smithfield Food will operate as a wholly-owned independent subsidiary of Shuanghui International. Pope will continue to serve as president and chief executive officer of Smithfield, and the management teams and workforces of Smithfield's independent operating companies will remain in place.
There will be no closures at Smithfield's facilities and locations, and the company's headquarters will remain in Smithfield, Virginia.
The transaction is subject to approval by Smithfield's shareholders, receipt of regulatory approvals and other customary closing conditions. It is expected to close in the second half of 2013.
Smithfield Foods is a $13bn global food company and leading pork processor and hog producer, employing 46,000 people. In the US, the company is a supplier of packaged meats under brands including Smithfield, Eckrich, Farmland, Armour, Cook's, Gwaltney, John Morrell, Kretschmar, Curly's, Carando, Margherita, and Healthy Ones.