Wednesday, July 3, 2013

Professor Discusses Smithfield Foods Deal On Fox News

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By Steve Vaughan,

WILLIAMSBURG – Deborah Hewitt, a professor at the College of William and Mary's Mason School of Business, was going national Tuesday afternoon to talk about Smithfield Foods going multi-national.
Hewitt appeared on Fox Business News to discuss the acquisition of Smithfield by the Chinese firm, Shuanghui International, the dominant pork and sausage processor in China.
The deal is under scrutiny by Congress, but Hewitt said such deals — the Smithfield purchase will cost Shuanghui International $4.7 billion — are generally a good thing.
"It's putting capital into the agricultural and food processing sectors of the economy," she said in a phone interview Tuesday before the Fox appearance. "These deals have to be looked at from a security standpoint as well, but in most cases it's a positive development. They put more money into the company, which allows it to innovate and to pay higher wages."
Michael Ho, a professor at the Darden School of Business at the University of Virginia, was also interviewed by Fox Tuesday. He said Smithfield and Shuanghui are a good match.
"They have what they are looking for, vertical integration of the company," Ho said, adding that demand for pork in China is several times the U.S. demand.
Asked if the deal could be blocked by Congress or the executive branch, he said it was unlikely.
"They'd essentially have to make the case that bacon is vital to national security," he joked.
Corporate headquarters will remain in Smithfield so, for now at least, the 2,800 jobs there appear to be safe.
Hewitt noted that the Chinese firm paid a premium of 30 percent above what Smithfield stock was fetching on the market. That indicates the company was undervalued.
"Don't ask my why that was the case," Hewitt said. "There are many reasons that could be true, and I just don't know."
Given that Smithfield hams are something of a Southern cultural touchstone, there has been concern since the sale was announced about foreign ownership, and whether the quality of the product would suffer.
"I'd think that's the last thing the Chinese want," Hewitt said. "They are buying the company because of its market share and its products. What they want is to be able to take the innovative methods of Smithfield back to China. They certainly don't want to see the domestic market slump."
Smithfield was also recently in the news for parting ways with Paula Deen, the celebrity chef facing sharp criticism over admitted use of racial slurs.

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