Smithfield Foods' top executive is set to testify
Wednesday before two senators who are deeply skeptical of a blockbuster deal to
sell America's largest pork processor to a deep-pocketed Chinese concern.
Smithfield chief executive C. Larry Pope has been an unflappable cheerleader for the company's proposed sale to Shuanghui International, which still must clear regulatory hurdles.
The acquisition, he's noted, would translate to a 31 percent premium for Smithfield shareholders, and it also has come with assurances from Shuanghui executives that U.S operations will be left unchanged and employees kept on. Pope has also stressed repeatedly that it would lead to the export of American pork to China and not the reverse.
But, state and federal politicians have voiced concerns that the deal's approval would harm the country's pork supply, and the hearing will give members of the Senate Agriculture Committee the first crack at publicly grilling Pope.
The committee's chairwoman, Sen. Debbie Stabenow, D-Mich., is already one of the most vocal critics of the deal in Congress.
"The agencies responsible for approving this possible merger must take China's and Shuanghui's troubling track record on food safety into account, and do everything in their power to ensure our national security and the health of our families is not jeopardized," she said in a June statement.
She's also argued that a standard review from the Committee on Foreign Investment in the United States, or CFIUS, should be beefed up.
Specifically, she led a group of senators in writing a letter that urges the White House to add the Department of Agriculture and the Food and Drug Administration to the list of agencies reviewing the deal during the CFIUS process.
Sen. Chuck Grassley, R-Iowa -- who sits on the agriculture panel and has previously battled with Pope as a champion of ethanol subsidies -- was one of the first members of Congress to air concerns with the deal.
"I've always said that we are nine meals away from a revolution, so a safe and sustainable food supply is critical to national security," he said shortly after the acquisition was announced.
For its part, Smithfield has said it welcomes the CFIUS review process, while dismissing the idea that Chinese ownership of the company presents the type of national security problems described by politicians.
"We believe the proposed combination does not present any national security concerns, is good for U.S. farmers and agriculture and will advance US-China relations," said Smithfield spokeswoman Keira Lombardo on Monday.
"We will continue to provide Congress and CFIUS with all the information requested to allow a full and timely review of the combination," she said.
What's also clear is that despite all the reassurances, some lawmakers will continue to raise the specter of national security and food safety concerns, despite what Smithfield says. And the voices don't just come from the Senate.
"We should at least put on the table that there's a national security concern associated with food safety," said Rep. J. Randy Forbes, R-Chesapeake, whose district includes Smithfield's headquarters.
"We've been working very closely with the Senate Ag Committee and the House Ag Committee," Forbes said in an interview with the Daily Press.
"You'll find that we'll be at the Senate hearing, and we'll probably submit questions to the committee," he added.
Pope is not the only person scheduled to testify before the Senate hearing, which will start at 2:30 p.m. Wednesday.
Rounding out the witness list are Matthew J. Slaughter, director of Dartmouth College's Center for Global Business and Government; Usha Haley, director of West Virginia University's Robbins Center for Global Business and Strategy, and Daniel M. Slane, a congressional appointee to the U.S.-China Economic and Security Review Commission.
All three have weighed in on the Smithfield-Shuanghui deal in various forums; Slaughter could be described as supportive, but Slane and Haley are fierce opponents.
In a Monday interview with the Daily Press, Slane said China's experience as a buyer of coal and iron ore has made the country and its businesses more strategic about controlling key commodities.
"They decided it's better to own the mine" than buy the coal on the open market, he said. Following that logic, he added, Chinese executives think it's better to own Smithfield than to import its hogs.
"They can control the price of hogs to some extent by buying Smithfield," the world's largest hog farmer, he continued.
"And they're going to use Smithfield's technology -- hog genetics and manure handling (for example) -- to our detriment," said Slane, who co-owns an Ohio company involved in commercial real estate, as well as production of synthetic coal.
By increasing the efficiency of unsophisticated Chinese hog farm operations, Slane said, "they'll export less pork, and even import pork to the U.S. under the Smithfield brand.
Slaughter has taken a different view of the potential acquisition.
"Inbound foreign investment has long benefited the U.S. economy, and a smooth Smithfield purchase would send a valuable signal to China and to the world that the United States welcomes such investment," wrote Slaughter in a piece co-written with a colleague and published on Dartmouth's website two weeks ago.
Should it win approval, he continued, "the acquisition of Smithfield can serve as an example of a large U.S. company being acquired by a Chinese entity without controversy."
Haley, however, warned that Shuanghui's investment, though lucrative for shareholders, could come with costs for "U.S. consumers and society."
She said Shuanghui has a culture that has seemed to foster food safety violations, noting in an op-ed piece published in USA Today that in 2011, the company "gave its pigs a growth-enhancing drug banned in the U.S.A. and the European Union."
And she argued that the CFIUS should follow the lead of countries that have walled themselves off to Chinese investment in agriculture: "Brazil and New Zealand have blocked China's domination of agriculture, and we should do the same," he wrote.
The hearing will be streamed online at ag.senate.gov.
(c)2013 Daily Press (Newport News, Va.)
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