Smithfield Foods, the largest pork producer in the United States, has recently filed a proposal to return to the public market. This move involves Smithfield and an indirect subsidiary of its China-based owner, WH Group, offering shares on the Nasdaq Global Select Market. The company plans to trade common stock under the ticker symbol “SFD.” While the timing, number of shares, and price range for the proposed offering have not been determined yet, WH Group previously announced its intention to sell 20% of its shares, valuing Smithfield at no less than $5.38 billion.
The decision for Smithfield to go public again comes at a time when the pork industry is facing pricing pressures and increased scrutiny over ties to China. A public listing would allow WH Group to focus on its Chinese operations while providing Smithfield with the flexibility to raise capital in a challenging economic environment. Smithfield intends to use the proceeds from the listing to expand its packaged meats capacity, invest in infrastructure, and automation. The company has also taken steps to offload a significant portion of its hog supply to reduce operating costs and concentrate on packaged meats.
Pork prices have been declining faster than hog prices, leading to pressure on processor margins and a slowdown in production. Factors such as strong production levels, depressed pork prices, rising livestock costs, and a stronger U.S. dollar have contributed to these challenges. Additionally, Smithfield has been under scrutiny for its relationship with China, especially in light of concerns about Chinese ownership of U.S. farmland. Since WH Group acquired Smithfield in 2013, it has become one of the largest Chinese landholders of U.S. farmland, prompting U.S. lawmakers to consider restrictions on farmland access for entities associated with China.
By spinning off its U.S. and Mexico businesses, Smithfield aims to enhance its market reputation and credibility, providing more transparency to investors in the United States. The company had previously separated its European operations in preparation for the proposed listing. With approximately 34,000 employees in the U.S. and 2,500 in Mexico, Smithfield is known for its bacon production and partnerships with contract farms. In the nine months ending Sept. 29, the company reported gross profits of $1.4 billion, compared to $604 million in the same period in 2023.
In conclusion, Smithfield’s decision to return to the public market reflects its strategic response to industry challenges and regulatory concerns. The proposed listing offers the company an opportunity to raise capital, expand its operations, and improve its market reputation. As the pork producer navigates the complexities of the market, its focus on innovation and growth will be essential to its success in the evolving landscape of the food industry.
