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Shuanghui's acquisition deal win-win for China, U.S.


09:36, June 01, 2013

ZHENGZHOU, May 31 (Xinhua) -- China's largest meat processor's acquisition of a leading U.S. pork producer will be a win-win deal that benefits both countries, a Chinese expert said on Friday.

The deal comes at a time when the United States is producing more pork than it can consume while China faces growing pressure to feed its population with quality, safe protein products, said Feng Yonghui, chief analyst with Beijing Zhongke Yiheng Modern Farming Information and Technological Institute.

Shuanghui International agreed to buy Smithfield Foods for 7.1 billion U.S. dollars, or 34 dollars per share, on Wednesday, breaking new ground for Chinese takeovers of overseas companies that have so far focused on energy, mining and other natural resources.

Chinese people's consumption of meat has increased fourfold since China opened up its economy in the 1970s, according to a joint research report by Rabobank and the Earth Policy Institute.

To meet rising domestic demand, China has imported around 400,000 tonnes of pork annually in recent years, with pork consumption in 2012 set to reach 52 million tonnes, the report shows.

Yet some U.S. lawmakers have expressed their concern over the deal's impact on food sufficiency in the United States, where Smithfield claims a 30-percent market share.

Feng and Smithfield itself have been quick to try to quell such worries. "The deal is unlikely to cause big changes in the United States," according to Feng. "The U.S. market has reached saturation, as is evident in low retail prices and meat processors' low profit margin."

He also noted that meeting domestic demand will be the top priority for U.S. meat producers, regardless of how attracted they are to the Chinese market.

In a company announcement, Smithfield said Shuanghui will not bring major changes to the company's U.S. operation.

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