U.S. clears Smithfield's acquisition by China's Shuanghui | Reuters

Fri Sep 6, 2013 8:43pm EDT

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A water tower with the town slogan ''ham, history and hospitality'' rises over Smithfield, Virginia May 30, 2013.

Credit: Reuters/Rich-Joseph Facun

(Reuters) - The U.S. Committee on Foreign Investment has cleared the way for Shuanghui International Holdings Ltd's proposed $4.7 billion acquisition of Smithfield Foods Inc, the companies said on Friday.

The deal, which would be the biggest purchase of a U.S. company by a Chinese firm, still needs shareholder approval at a special meeting scheduled for September 24.

Shuanghui and Smithfield expect the transaction, valued at $7.1 billion including debt, to close shortly after that meeting.

Experts in Washington and on Wall Street had expected the deal to get the nod from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency executive branch panel that examines foreign investment for potential threats to national security.

They also do not expect a move by a major investor to block the deal.

Activist hedge fund Starboard Value LP, which has a 5.7 percent stake in Smithfield, is searching for an alternative buyer for Smithfield and has said it would vote against the merger.

Shuanghui's bid, which aims to satisfy China's growing appetite for pork, stirred concern about food safety and domestic pork supplies among some U.S. politicians and faced review by a committee of several government agencies overseen by the Treasury Department.

As international interest in American companies has risen dramatically in recent years, CFIUS reviews have increased in number. Since 2007, CFIUS reviews of deals involving Chinese firms have tripled. Reviews of Japanese firms have increased sevenfold.

Although Congress cannot approve or block deals, lawmakers can force companies to abandon their merger plans. They did so in 2005 when China's CNOOC Ltd made an unsuccessful bid to buy U.S.-based Unocal for $18 billion.

Some experts compared the Shuanghui-Smithfield combination, which would marry two of the world's largest pork producers, to the 2012 takeover of AMC Theaters by China's Dalian Wanda Group for $2.6 billion. That transaction was allowed to proceed when the CFIUS determined the deal posed no threat to national security.

Shares in Smithfield rose 1.7 percent to $34.49 in extended trading.

(Reporting by Lisa Baertlein in Los Angeles, P.J. Huffstutter in Chicago and Aditi Shrivastava in Bangalore; Editing by Ken Wills)

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