Smithfield Owner's IPO Part Of Plan To Seize The Asian Pork Market

By Karla Paris

China accounts for four-fifths of the growth in the global pork market and premium pork manufacturer wants its share

China's WH Group, which became the world's biggest pork company after buying U.S.-based Smithfield Foods last September, announced it is planning to raise up to $5.3 billion in an initial public offering on the Hong Kong Stock Exchange. The money raised would go towards paying off the debt used to purchase Smithfield last year for $4.7 billion in cash.

WH Group chairman and CEO Wan Long said, "WH Group’s listing on the Hong Kong Stock Exchange is in line with our stature as the world’s largest pork company, with an increasingly global reach. Being a listed company in a major financial center such as Hong Kong will raise our standing, promoting accountability and transparency to drive our future growth.”

The Wall Street Journal notes, “China is the world's largest pork consumer, accounting for over half of the world's total consumption in 2012, and the country is expected to represent more than 80% of growth in global pork consumption over the next five years, according to consulting firm Frost & Sullivan.” Consumption in Western markets, meanwhile, is leveling off.

WH Group’s brands offer premium quality packaged meat and fresh pork products in many parts of the world. In their respective regions, many of the Company’s brands, such as Shuanghui, Smithfield, John Morrell, Farmland, and Eckrich, are trusted household names, some with a century-old heritage.

The transaction between WH Group and Smithfield Foods merged the best each company had to offer when it comes to technology, resources, practices, market access, and operational expertise. With its focus on increasing pork exports from the U.S. to Asia, building this partnership only made sense.

Pork is the main meat product consumed in China, but there is evidence to show that more can still be sold to Chinese consumers. A report by Frost & Sullivan shows that Chinese consumers ate half as much meat overall compared to American consumers.

Additionally, beef products are skyrocketing as there is a dwindling supply of cattle across the globe causing fresh beef prices to climb to $5.28 a pound in February, up almost a quarter from January and the highest price since 1987. CattleFax, a Colorado-based information group, reports that everything that's produced is being consumed.