The head of Smithfield Foods, the country's largest pork producer, told skeptical lawmakers on Capitol Hill on Wednesday that the proposed $4.7 billion sale of his Virginia-based company to a Chinese rival will create jobs and expand markets.
CEO Larry Pope, testifying before the Senate Agriculture Committee, said the deal would be a boon for American agriculture.
"This is a wonderful opportunity for the U.S. to do what it does best, which is to produce agricultural products and ship those around the world," he said.
But many on the Senate panel were unconvinced and voiced concerns that the proposed buyout by Shuanghui International Holdings Ltd., the largest ever of an American company by a Chinese company, could impact U.S. food safety and security.
"There is something really offensive about the reality that [Shuanghui] can do this here, but a very aggressive company like Smithfield could not do that in China," Sen. Mike Johanns, Nebraska Republican, told Mr. Pope. "You know for a fact that you could not do in China what Shuanghui is doing here. The Chinese regulators would laugh at you."
Senators were skeptical of Shuanghui's commitment to upholding U.S. food safety standards and questioned whether foreign ownership of a major American food producer posed a threat to national security.
The sale is already being reviewed by the Committee on Foreign Investment in the United States, an interagency panel that focuses on national security implications that is chaired by Treasury Secretary Jack Lew.
Mr. Pope said his company will be the "same old Smithfield, only better."
"I think this is the opportunity America has been looking for to import jobs," he said. "There's been a discussion for the last 20 years about jobs being exported out of this country into China, and things made in China and shipping back into the United States. This is the exact reverse of that."
China is responsible for 50 percent of the world's pork production, Mr. Pope said. The average Chinese person consumes 20 pounds more pork a year than the average American. In fact, China's pork consumption per person has grown by 25 percent over the past 15 years, while U.S. consumption has shrunk by 10 percent.
"Pork is what is on the menu for Chinese consumers," he said, warning that "without the opportunity to grow outside the United States, there is no opportunity for U.S. pork producers to expand."
Smithfield is eager to tap into a growing market, and so are the many pork farmers and processors that work with the company. It "makes perfect business sense," Mr. Pope explained.
Sen. Debbie Stabenow, Michigan Democrat, said it would be more efficient for China to remove existing trade barriers to American pork.
"We've been told Shuanghui wants to buy Smithfield because they need more pork and want it sourced from the United States, but if that were true, American producers would be happy to do that today," the committee chairwoman said.
However, she said, "We cannot open the Chinese markets. They use illegal, unscientific food safety standards to block both pork and beef."
"I am all about exports," she said. "But it seems to me removing the unfair barriers to China would be a lot quicker and more efficient than just saying that the only way we can get in is if they own our company. That doesn't make sense to me."
Ms. Stabenow and other senators suggested that Shuanghui is only interested in acquiring Smithfield's superior technology so that it can eventually produce cheaper pork in China that would compete with U.S. producers.
Smithfield told the committee that it has no plans to switch production from the U.S. to China, because it is cheaper to produce pork here. The company also said it would not layoff workers or reduce wages once Shuanghui acquires the company. Smithfield currently employs more than 46,000 people around the world.
"Let me be clear: Shuanghui intends to retain Smithfield's management team, its plants and its employees," Mr. Pope said. "There should be no noticeable impact on how we do business operationally in America and around the world as a result of this transaction, expect that we will do more of it."
The proposed sale, which both companies hope to close by the end of the year, was first announced on May 29, with Shuanghui offering $34 per share, a 31 percent premium on Smithfield stock at the time. On Wednesday, Smithfield shares closed at $32.84, as the price has risen over the past month since news of the deal was made public.
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