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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Smithfield Foods (UNKNOWN: SFD.DL2 ) were smoking today, gaining as much as 31% after a Chinese company agreed to buy the meat processor for $7.1 billion.
So what: Shuanghui International Holdings reached a deal with the pork seller, paying $34 a share for Smithfield. The stock traded as high as $33.96 today. The deal, which includes debt, also marks the largest buyout of an American company by a Chinese one. Shuanghui controls China's largest meat processor, and today's move will give it ownership of the world's largest pork producer, further strengthening its positioning in the meatpacking industry. In a statement, Shuanghui said, "The combination creates a company with an unmatched set of assets, products, and geographic reach."
Now what: Smithfield CEO Larry Pope also touted the deal, calling it a "great transaction for all Smithfield stakeholders," and saying it will not affect Smithfield's operations. The deal is on track to close in the second half of the year, but still needs to be approved by Smithfield shareholders and the Committee on Foreign Investment in the United States, which regulates acquisitions of U.S. companies. The acquisition would put pressure on competitors such as Tyson Foods and Pilgrim's Pride as Shuanghui should gain further pricing power with the move.
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