Shuanghui secures bank loan

China's meat producer Shuanghui International Holdings Ltd announced Monday that it has signed a $4 billion loan agreement with a consortium of eight banks, which will be used for acquiring US meat firm Smithfield Foods.

The agreement was signed on Friday, and includes a $2.5 billion three-year loan and $1.5 billion five-year loan, according to a company statement sent to the Global Times Monday.

These loans will come from banks such as Standard Chartered Bank, Industrial and Commercial Bank of China (Asia) Ltd, DBS Bank and Royal Bank of Scotland, the company said.

Shuanghui Chairman Wan Long said in the statement that the company is encouraged by the financial support and trust of banks in China and abroad and would make all efforts in expanding globally.

The company announced in May it will spend $4.7 billion to buy Smithfield Foods, the world's largest pork processor, which is valued at nearly $7.1 billion.

The purchase of Smithfield Foods marks an important step for Shuanghui's internationalization, and the loans will facilitate the completion of the deal, Yan Qiang, a partner of Beijing-based Hejun Consulting, told the Global Times Monday.

But Yan expressed concerns over Shuanghui's capital flows, saying that the company will face financial pressure after funding the Smithfield acquisition through new debts.

"Shuanghui is a large company in China, but does not make too much profit, as the profit margin of domestic food industry is not high - usually no more than 10 percent," said Yan, adding that it is likely to turn to capital market, such as an IPO, to pay off the loans in the future.

Reuters reported in July that Shuang­hui International Holdings was planning a listing of the merged company on the Hong Kong Stock Exchange after the takeover.

Shuanghui refused to comment on the IPO news when contacted by the Global Times.

Currently the deal is still waiting for approval from Smithfield's shareholders and the Committee on Foreign Investment in the US, a source close to the deal who asked not to be named told the Global Times Monday

Smithfield said in an August press release that the deal was expected to close in the second half.

Some US small farmers, consumers and environmentalists have expressed their opposition to the deal out of food safety concerns, as Shuanghui's pork products will be exported to the US but the consumers in the US do not have too much faith in China's food supervision, said Yan, suggesting that the path to the completion of the deal will not be smooth.