Analysts at Fitch Ratings praised the proposed takeover of Smithfield Foods by a Chinese company in a note out Monday, arguing that it will benefit both companies.
Fitch said it is "probable" that Shuanghui International Holdings Ltd. will complete its $4.7 billion deal for the largest pork producer in the U.S, despite political concerns around foreign-ownership of U.S. food companies. Fitch noted, however, that the deal could result in higher prices for pork products in the U.S.
"Increased exports to China could initially lower pork availability in the U.S. and result in higher protein prices domestically," Fitch's analysts wrote.
But the deal looks good for Shuanghui International and Smithfield Foods Inc., Fitch said. Shuanghui gets "a high-quality source of fresh pork during a time when Chinese consumers have heightened concerns about food safety." Smithfield will likely expand, and its shareholders will get a hefty payout. The deal represents a 31 percent premium over the company's stock price on May 28, the day before the deal was announced.
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