By Patrick Thomas

Smithfield Foods wants to be seen as America's pork champion after more than a decade under Chinese ownership. Its goal may rely on how the Trump administration manages trade ties with Beijing.

Smithfield completed an initial public offering and is expected to start trading on the Nasdaq on Tuesday under the symbol SFD.

Since late 2013 Smithfield has been a subsidiary of WH Group, whose $4.7 billion deal was one of the largest takeovers of a U.S. company by a Chinese firm at that time. The deal placed recognizable meat brands found at supermarkets including Smithfield and Eckrich with WH.

Smithfield's ties to its parent company and the Chinese market remain strong. Hong Kong-based WH Group is retaining a roughly 90% stake in Smithfield after the listing. While Smithfield remains based in the Virginia town whose name it shares, WH Group can nominate the majority of board directors.

"We're an American company, American management team and made in America, " said Shane Smith, a longtime Smithfield executive who took over as chief executive in 2021, in an interview. With the initial public offering, he said, "I think it'll make that story easier to tell."

Concerns on China

Members of the Luter family founded Smithfield in 1936 and the company grew through acquisitions to become the biggest U.S. pork processor. Besides its namesake bacon and hams, it is also the nation's largest producer of hogs, running farms from Utah to North Carolina.

WH Group acquired Smithfield to help improve its technology and lend expertise to boost its operations in China. The combined company went public in Hong Kong in 2014.

The arrangement has been good for Smithfield, too, according to Smith. China has been a key market for products that don't get much love from American consumers, such as pigs' heads and feet. WH Group's feedback helped Smithfield change how it removes kidneys from hogs and packages exported pig heads, translating to premium prices.

Concerns over China's involvement in the U.S. economy have escalated since WH bought Smithfield. President Trump launched a trade war with China in his first term, and has threatened a 10% tariff on imports from the country in his second.

Some politicians have urged restrictions on China's ownership of farmland, fearing the country could facilitate spying and have undue influence on the food-supply chain.

"The problem is, China is not our friend, and their interests are not our interests," Sen. John Cornyn (R., Texas), a member of the Senate Agriculture Committee, said this week when asked about Smithfield and its Chinese ownership.

Smith has pushed back, saying WH's deep pockets have helped Smithfield invest in the American economy and withstand a decline in exports to China. The company generates more than $14 billion in annual revenue and employs about 34,000 people in the U.S.

Smithfield last year divested itself of over 40,000 acres of its U.S. farmland. It continues to own roughly 85,000 acres, less than 0.01% of the nation's total.

Smith said the move isn't driven by lawmakers' concerns. Instead, it is part of a broader push to reduce its exposure to hog farms that supply its slaughter plants. Hog farm owners often face challenges related to sharp swings in prices for the animals and feed.

Selling a pork rebound

Analysts are watching the investor reception for Smithfield as a gauge for other consumer-goods companies considering IPOs.

Smithfield's IPO priced at $20 a share, below its target between $23 and $27 a share, and cut the amount of shares available in the offering. The pricing gives the company a market value of around $8 billion.

The company said its shares generated a lot of demand but it was focused on finding the right group of investors and changed the deal structure to maximize that outcome.

Smithfield has warned that increased trade tensions and higher wage costs from new immigration laws are among its challenges ahead. Trump has threatened a 25% tariff on products from Mexico, a major buyer of U.S. hams. Smith said that in a trade war scenario, the company could redirect pork toward different Asian markets, or pet food production.

"We have a lot of different levers that we've built," Smith said.

While an excess supply of hogs has pressured the U.S. pork industry in recent years, Smithfield's boss said the company's profits are as strong as ever.

Smithfield has worked to streamline operations, shut poor-performing plants and expand its branded and private-label meat products sold at grocery stores. Pork profitability has also improved as lower grain prices have made it cheaper to feed livestock.

The offering raised $522 million. Smithfield plans to use IPO proceeds to invest in plant improvements, expansions and automation. In the past, the company has considered diversifying beyond pork, but Smith said the company's size, not its foreign ownership, would prevent it from making larger meat industry acquisitions.

Instead, Smith said it is focused on growing its packaged-foods business. Packaged meat sales, which tend to carry higher and steadier profits than pork processing, make up 58% of the company's sales and much of its profit.

Write to Patrick Thomas at patrick.thomas@wsj.com

(END) Dow Jones Newswires

January 28, 2025 09:55 ET (14:55 GMT)

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