Dive Brief:
- Smithfield Foods on Monday filed a proposal that would return the U.S.’ largest pork producer back to the public market.
- Smithfield and an indirect subsidiary of China-based owner WH Group will offer shares on the Nasdaq Global Select Market as part of the proposed listing, according to the filing with the Securities and Exchange Commission. The company would trade common stock under the “SFD” ticker symbol.
- Smithfield has yet to determine the timing, the number of shares and the price range for the proposed offering. WH Group previously said it would sell 20% of its shares in a plan valuing Smithfield at no less than $5.38 billion.
Dive Insight:
Smithfield’s return to the public market comes amid pricing pressures in the pork industry and mounting public scrutiny over U.S. companies’ ties to China. A public listing would allow owner WH Group, the world’s largest pork producer, to focus on its Chinese operations while giving Smithfield the flexibility to raise capital in a difficult economic environment.
Smithfield would use the proceeds from the listing to expand its packaged meats capacity and further invest in infrastructure and automation, according to a plan approved by shareholders on Dec. 6. The Smithfield, Virginia-based company has recently moved to offload a significant portion of its hog supply in efforts to cut operating costs and focus more on packaged meats.
Pork prices have declined faster than hog prices, pressuring processor margins and prompting a slowdown in production, according to a report from the U.S. Department of Agriculture. Strong production levels earlier this year have depressed pork prices, while rising livestock costs and a stronger U.S. dollar have hampered exports.
As pork producers struggle with declining margins, Smithfield has also faced questions about its relationship to China as congressional lawmakers look to clamp down on Chinese ownership of U.S. farmland. WH Group bought Smithfield more than a decade ago for $4.7 billion, and the acquisition was called the biggest “Chinese takeover” of a U.S. company at the time.
Since the purchase of Smithfield in 2013, WH Group has become one of the largest Chinese landholders of U.S. farmland. As trade tensions with China flare, U.S. lawmakers have looked to restrict farmland access to entities associated with the country.
Spinning off Smithfield’s U.S. and Mexico businesses would enhance the pork producer’s “market reputation and credibility” by providing more transparency to investors in the United States, WH Group said in a previous filing. Smithfield previously carved out its European operations in advance of the proposed listing.
Smithfield employs approximately 34,000 people in the U.S. 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 its SEC filing.
Gross profits for the nine months ending Sept. 29 totaled $1.4 billion, compared to $604 million in the nine months ending Oct. 1, 2023.