Acquiring Smithfield would give China's biggest pork producer access to more advanced production technology as well as 460 farms that raise about 15.8 million hogs a year, according to Smithfield, Virginia-based Smithfield's website.
Valued at $7.1 billion including debt, the deal would be the largest for a meat producer and the biggest Chinese takeover of a U.S. company, according to data compiled by Bloomberg. Smithfield accepted Shuanghui's offer of $34-a-share on May 29, priced at a 31 percent premium to the close the day before, the companies said that day in a statement. The U.S. producer has 30 days to continue talks with possible buyers Charoen Pokphand Foods Pcl and JBS SA, people familiar said.
Eoin Treacy's view The USA's meat processing sector is dominated by a small number of companies which represent an oligopoly. By acquiring Sanderson Farms, Shuanghui gains access to a brand but more importantly a foothold in the world's largest consumer market. The medium to long-term outlook for the sector remains positive considering the improving ability of more people to afford greater calorie intake. This is true across the processed food sector and potential for additional M&A activity remains positive. .
Pilgrim's Pride fell to as low as 25 ¢ in 2008 but rallied impressively into 2010. It spent much of the last three years ranging below $8.50. The share broke successfully above $10 earlier this month and rallied to test the 2010 peak near $12.60. While the potential for some consolidation of recent gains has increased, a sustained move below the 200-day MA would be required to question medium-term potential for additional upside.
Tyson Foods broke out to new all-time highs in March and despite some volatility has held a progression of higher reaction lows. A sustained move below $23 would be required to question medium-term scope for additional upside.
Sanderson Farms failed to sustain the break below $38 last year and quickly rallied to break out to new all-time highs. The share is becoming increasingly overextended relative to the 200-day MA but a break in the progression of higher reaction lows would be required to check momentum beyond a brief pause.
Hormel Foods broke out emphatically in January and rallied persistently to test the $43 area where it encountered resistance last week. A consolidation of recent gains is underway but a sustained move below the 200-day MA would be required to question medium-term potential for further upside.