Smithfield Foods won national security clearance on Friday for its proposed $4.7 billion sale to a Chinese meat processor, overcoming one of the biggest obstacles to a deal.
The approval by an important government committee came despite deep-seated skepticism by a group of lawmakers, who professed concern about a Chinese company owning Smithfield, the country’s biggest pork producer.
Analysts have expected Smithfield and its suitor, Shuanghui International, to prevail. The Committee on Foreign Investment in the United States, commonly known as Cfius, has historically reviewed deals involving key industries like energy and technology. But it has little precedent in examining food deals.
Both companies have argued that their combination poses no danger of compromising American food safety standards. Indeed, they have contended that the goal is to export more Smithfield pork to China, satisfying rising demand for high-quality meat in that country.
“This transaction will create a leading global animal protein enterprise,†Zhijun Yang, Shuanghui’s chief executive, said in a statement on Friday. “Shuanghui International and Smithfield have a long and consistent track record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company.â€
But the deal, the largest-ever takeover of an American company by a Chinese counterpart, was almost certain to attract scrutiny.
Skeptics have repeatedly raised concerns about the possibility of compromised food safety standards. Members of the Senate Agriculture Committee held a hearing this summer reviewing whether foreign takeovers of American food producers was in the country’s best interests.
Shuanghui in particular has been a focus of that scrutiny because it has struggled with food quality controversies in the past. The company was at the center of a Chinese television investigation into sales of pork produced with clenbuterol, a food additive banned in the United States, the European Union and China because of health risks.
The company apologized and promised to revamp its safety regimen.
Though the Smithfield deal cleared the Cfius review, it must still pass muster with the company’s shareholders, who are scheduled to vote on Sept. 24. An activist investor who owns 5.7 percent of the pork producer, Starboard Value, disclosed recently that it would vote against the transaction.
The hedge fund added that it has held talks with potential rival suitors who, it said, were willing to pay “substantially†more than Shuanghui’s $34-a-share bid.
Shares in Smithfield closed on Friday at $33.92, suggesting that investors believe Shuanghui’s offer will succeed.
The Cfius approval came on the same day that Smithfield reported a 36 percent drop in first-quarter profit.
Net income was $39.5 million, or 27 cents a share, compared with $61.7 million, or 40 cents a share, in the period a year earlier. Revenue rose nearly 10 percent, to $3.4 billion.
