June 9, 2017
WH Group, Smithfield eye expansion in beef and poultry sectors
WH Group Ltd, owner of Smithfield Foods, is looking for US and European beef and poultry assets which it could acquire, Reuters reported.
The move is expected to escalate competition with meat packers Tyson Foods Inc. and JBS SA. With WH Group eyeing beef and poultry, Smithfield - already the world's biggest pork producer - will be brought head-to-head against both companies, and BRF, in vying for market share of the meats.
The venture reflects Smithfield's interest in diversifying and expanding its meat portfolio, the company's chief executive Ken Sullivan, said.
"We're a food company," he commented. "No one said that we're strictly a pork company."
According to Luis Chein, WH Group's director of investor relations, the company's is considering assets in the US and Europe. He did not disclose further details.
Chein, however, noted that the timing to enter the beef business is attractive as China has recently agreed to resume US imports following a ban implemented due to the mad cow disease scare in the US in 2003. Also, it is "certainly the direction" for the company to implement in other meat businesses the vertically integrated model it has for its pork entities.
WH Group still possess the financial capability for more acquisitions, with its bank balances and cash at US$1.14 billion by the end of 2016, and US$2.72 billion in unutilised banking facilities, based on its latest annual report.
Any future buys are seen as part of the company's efforts to gain complete control of meat production by cutting its dependence on external producers which supply Smithfield with beef and chicken.
"For us, the next step to develop our business is to consider other sources of animal protein," Chein said. He added that WH Group is more inclined to acquire slaughterhouses and processing plants for beef, and all types of operation for poultry.
The company also foresees vast opportunities for growth in consumption of these meats in China.