China Food Industry Targeting Foreign Rivals

In September when China's Shuanghui International completed its record $4.7 billion purchase of Smithfield Foods, it was the biggest-ever Chinese takeover of a US public company, combining the world’s largest pig producer with China’s major meat processing firm Henan Shuanghai Investment & Development. But as this FinanceAsia article points out, the high-profile deal is part of a broader trend of Chinese food companies snapping up foreign producers of processed and raw foods because of a lack of arable land and clean water at home and the demands of China’s vast and increasingly affluent population.

“The drive for securing its food supplies has been an objective of Chinese policy makers and companies for several years. It has been evident in overseas acquisitions by companies in the dairy sector and investment in arable land throughout the world, including Europe and Australasia,” said Jason Rynbeck, vice chairman of M&A across the Asia Pacific region at Barclays – a bank that advised Smithfield during the Shuanghui takeover.

So it is hoped that the Smithfield acquisition will inject more reliable quality pork products into the supply chain and help spread better practices across China’s pork suppliers. Although Shuanghai grabbed the headlines, China’s dairy industry has been in the vanguard of overseas acquisitions, partly to ameliorate the public relations damage caused by tainted milk scandals and to ensure better quality raw material.

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