China's WH Group Targets Beef and Poultry Assets in U.S. and Europe

China's WH Group Targets Beef and Poultry Assets in U.S. and Europe

Smithfield Foods Inc's owner, China-based WH Group Ltd, is scouting for U.S. and European beef and poultry assets to buy, in a move that would sharpen its rivalry with global meat packers Tyson Foods Inc and JBS SA.

Expanding into beef and poultry would bring U.S.-based Smithfield, the world's largest pork producer, more in line with competitors Tyson, JBS and BRF SA, which each process pork, chicken and beef.

Smithfield Chief Executive Ken Sullivan told Reuters he is interested in the potential of diversifying into other meats to broaden the company's product portfolio, though no deals were imminent.

"We're a food company," he said. "No one said that we're strictly a pork company."

Sullivan did not provide further detail, but parent WH Group is looking for targets in beef and poultry in the United States and Europe, according to Luis Chein, WH Group's director of investor relations. He declined to name specific targets.

Chein declined to provide a timeline for expanding into the U.S. beef and poultry business or say how much money the company aims to spend.

It is an attractive time to enter the beef business, Chein said, because China last month agreed to resume U.S. imports after blocking most shipments since a U.S. scare over mad cow disease in 2003.

WH Group, which spent $4.7 billion for Smithfield in 2013, still has firepower for further buying, with bank balances and cash of $1.14 billion at the end of last year and $2.72 billion in unutilized banking facilities, according to its latest annual report.

Its search reflects wider disruption in the agriculture sector, where historically low grain prices have triggered a wave of consolidation among global seed and chemical companies. Cheap grain and strong demand for meat have generally helped increase operating margins for producers of pork, beef and chicken.

The meat sector also has seen a major player, JBS of Brazil, struggle for sales after inspectors in the country were accused of taking bribes to allow sales of tainted food.

JBS, the world's largest meat packer, announced on Tuesday that it was selling assets in South America in the company's first deal since its founders admitted to paying bribes to Brazilian politicians in exchange for favors.

JBS, in response to questions from Reuters on Wednesday, said its core U.S. assets, including chicken company Pilgrim's Pride Corp, are not for sale.

A move to acquire beef and poultry assets would be an about-face for Smithfield, which agreed to sell U.S. beef operations to JBS in 2008 for about $565 million and a stake in turkey producer Butterball LLC for about $175 million in 2010.

But it would fit into the company's efforts to run the entire production process by reducing its dependence on outside producers, which currently supply Smithfield with beef and chicken to make into products such as hot dogs.

Chein said it was "certainly the direction" for the company to mirror the vertically integrated model it has for the pork business in other meats. Smithfield owns most of the hogs it slaughters along with processing plants.

"For us, the next step to develop our business is to consider other sources of animal protein," Chein said.

Chein said WH Group would prefer to buy assets such as slaughterhouses and processing plants to expand into beef and will consider all types of operations in the poultry supply chain. He added that the company sees big room for growth in beef and poultry consumption in China.

The United States had 808 federally inspected livestock slaughterhouses last year, down more than a third from 1990, according to the U.S. Department of Agriculture.

 

Latest News

Why You Need to Understand How USDA Purchase Programs Work
Why You Need to Understand How USDA Purchase Programs Work

With pork producers facing prolonged economic headwinds, recent USDA commodity purchases of pork offer relief at pivotal times. It’s important to understand how these programs work, says NPPC president Lori Stevermer.

Get the Facts Straight on Highly Pathogenic Avian Influenza
Get the Facts Straight on Highly Pathogenic Avian Influenza

Now that the mystery illness impacting some dairy herds has been revealed as the same strain of Highly Pathogenic Avian Influenza that has been impacting the U.S. poultry flock, pork producers are asking questions.

Merck Introduces Sequivity with Microsol Diluvac Forte Adjuvant Prescription Vaccine
Merck Introduces Sequivity with Microsol Diluvac Forte Adjuvant Prescription Vaccine

Merck Animal Health announced it has received license approval from the USDA for Sequivity with Microsol Diluvac Forte adjuvant prescription vaccine for use in gilts and sows. 

What Does the Next Generation of the Pork Industry Want?
What Does the Next Generation of the Pork Industry Want?

It’s easy to make assumptions about what others think, but recent research funded by the Indiana Pork Producers Association and the Indiana Soybean Alliance proves it’s always better to go to the source itself.

Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps
Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps

U.S. employers report challenges in finding suitable job candidates with work-ready skills to fill open roles in ag. The AgCareers.com U.S. Skills Survey offers insights, data and trends to address skill development.

5 Ways to Improve Sow Longevity
5 Ways to Improve Sow Longevity

The potential for a successful sow starts well before the sow is first bred. Here are five ways you can improve sow longevity by focusing on the gilt from weaning until the time of first breeding.