It would seem that everybody is scared, for one reason or another of a multibillion-dollar acquisition announced yesterday by which the world’s largest pork producer, Smithfield Foods of (heh) Smithfield, Virginia, would be acquired by Shuanghui Group, a.k.a. Shuanghui International Holdings and also China’s biggest pork producer.
Some Americans are afraid that allowing the “Chinese” company to gain control of our largest pork producer will threaten our food supply, because the Shuanghui has a rather scandalous reputation for supplying consumers with tainted meat. Ironically, residents of Hong Kong have expressed fear that Shuanghui might get its corporate hands on Smithfield’s pork, because some of them pay a premium for Smithfield and other American-produced meats and foods, which they consider safer than China-produced fare.
I myself am not crazy about allowing foreign ownership of American food-producing companies, however, I think the bigger problem is that lawmakers in the U.S. have failed to enforce anti-trust regulations and allowed companies such as Smithfield to own a major percentage of the nation’s pork or poultry or beef slaughterhouses and also control a major portion of the nation’s pig or chicken or cattle farms.
And it’s not as if Smithfield is some producer of pristine quality meat that will be corrupted and contaminated by the Chinese. The company has a long history of abuse allegations at its slaughterhouses, both of hogs and its employees, and of major environmental disasters at the factory farms it owns or controls, not to mention issues involving food additives similar to those that plagued the Chinese company that would acquire it.
Like Tyson and other giant pork producing conglomerates, Smithfield’s factory farms keep their pigs confined indoors, on top of slotted floors where pee and poop drip into pits, from which it is pumped into lagoons. Big lagoons, like one in Utah that reportedly generates by volume more than eight times more shit than the humans do in the Salt Lake City metro area.
According to a 2007 report by Food & Water Watch, during a four-year span Smithfield hog-farm waste lagoons spilled 2 million gallons of waste into the Cape Fear River, 1.5 million
gallons into its Persimmon Branch, 1 million gallons into the Trent River and 200,000 gallons into Turkey Creek.
I am barely scratching the surface here in terms of the number and scope of nasty events and incidents linked to both Shuanghui and Smithfield; if you’re curious, visit the links above or use your Google box for more fun-filled facts, such as how well-received Smithfield has become in Poland and Romania, or that Chinese river full of hog carcasses.
Food issues aside, as a former business journalist I can’t help but check the fine print behind deals such as this one, and even though it’s widely being reported as a buyout by the Chinese, lo and behold the head hog in the back room may be none other than my old pal Goldman Sachs.
The Wall Street Journal reported that an investment group led by Goldman bought Shuanghui in April 2006 for about $255 million, then sold off half its interest three years later making about five times its initial investment. The Journal says a Goldman fund still owns more than 5% of Shuanghui.
So then it turns out that back in March Smithfield Foods hired Goldman Sachs after a major Smithfield shareholder urged the porcine corporation to “analyze options including splitting into three companies, instituting a cash dividend or bringing on new board members and executives with new skills.”
So *then* it turns out Goldman advised Smithfield against breaking itself up, and instead Goldman bought 700,000 shares of Smithfield and $25 million of its debt.
Finally, as if by magic yesterday, Shuanghui announces it will pay $4.7 billion for Smithfield plus assume enough debt that the deal is worth a total of some $7.1 billion. Goldman executives never will have to worry about eating tainted pork because with their share of the moolah they made on the deal, they can always dine on ahi tuna and Kobe beef.
Really, no one has the imagination to make stuff like this up.