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Diving overview:
- Smithfield Foods filed a proposal Monday to return the largest U.S. pork producer to the public markets.
- Smithfield and its China-based owner, an indirect subsidiary of WH Group, will offer shares on the Nasdaq Global Select Market as part of the proposed listing, according to a filing with the Securities and Exchange Commission. The Company trades its common stock under the ticker symbol “SFD.”
- Smithfield has not yet determined the timing, number of shares or price range of the proposed public offering. WH Group previously said it would sell 20% of its shares in a plan that would value Smithfield at more than $5.38 billion.
Dive Insights:
Smithfield’s return to the public markets comes amid price pressures in the pork industry and heightened public scrutiny of the U.S. company’s ties to China. The listing will allow owner WH Group, the world’s largest pork producer, to focus on its China operations, while giving Smithfield the flexibility to raise capital in a difficult economic environment.
According to the plan approved by shareholders on Dec. 6, Smithfield will use the proceeds from the listing to expand its packaged meat production capacity and make additional investments in infrastructure and automation. The Smithfield, Va.-based company recently moved to offload much of its meat. In an effort to reduce operating costs and focus more on packaged meats, the company stopped supplying pork.
Pork prices have fallen faster than hog prices, squeezing processor margins and triggering a production slowdown, according to a report from the U.S. Department of Agriculture. Higher production levels earlier this year pushed pork prices down, while rising livestock costs and a stronger U.S. dollar hampered exports.
As pork producers struggle with shrinking margins, Smithfield has also faced questions about its relationship with China as lawmakers seek to crack down on Chinese ownership of U.S. farmland. WH Group acquired Smithfield for $4.7 billion 10 years ago, and this acquisition was called the largest Chinese acquisition of an American company at the time.
Since acquiring Smithfield in 2013, WH Group has become one of the largest Chinese landowners of U.S. farmland. As trade tensions with China rise, U.S. lawmakers have been exploring ways to limit access to farmland by groups linked to China.
Spinning off Smithfield’s U.S. and Mexico operations will improve the pork producer’s “market reputation and credibility” by providing more transparency for U.S. investors, WH Group said in a previous filing. Smithfield previously split its European operations ahead of its proposed listing.
Smithfield employs approximately 34,000 people in the United States and 2,500 in Mexico. The bacon producer, which is also behind Nathan’s Famous hot dogs, has 400 company-owned farms and works with more than 1,900 contract farms, according to SEC filings.
Gross profit for the nine months ended Sept. 29 totaled $1.4 billion, compared to $604 million for the nine months ended Oct. 1, 2023.
