The nation’s largest pork production and processing firm is selling nearly a 5% stake in its business to a Chinese company.
Smithfield Foods Inc. announced it is divesting 4.95% of its stock, or seven million shares, to COFCO Ltd., China’s largest agricultural trading and processing company.
The transaction provides the Virginia-based firm with funds to pay down debt and cash to carry it over until the expected sale of its beef operations to JBS, analysts said. That sale is expected to close in the third quarter of this year.
The investment by the Chinese company strengthens ties with Smithfield, says Jonathon P. Feeney, food analyst for Wachovia Equity Research. Smithfield has been shipping ractopamine-free pork to China since last fall.
The value of the deal is expected to be determined in the near future, including price of the shares and the terms of an offering of $350-$400 million in senior contingent bonds.
Investors were unfazed by the stock sale as the company’s stock fell to its lowest level in about five years, to just over $17 after the deal was announced. It closed most recently at $17.30/share.
“I am very pleased that COFCO has agreed to make this equity investment in Smithfield. We have been working closely together, and this investment represents a significant step in cementing our relationship for the long term,” says C. Larry Pope, Smithfield’s president and CEO, in a statement posted on the company’s Web site.