Smithfield bosses to earn huge sums from Shuanghui takeover

Smithfield Foods executives, who run one of the worst-performing large US food makers over the past five years, are set to reap at least US$85.4 million from its sale to Chinese firm Shuanghui International Holdings.

The company has been under pressure from its biggest shareholder for lagging behind competitors Hormel Foods and Tyson Foods. Continental Grain, which has a 6.8 per cent stake, said in March that Smithfield should appoint new managers and break itself into three businesses as rising animal-feed costs made its hog-production unit unprofitable.

The total payout is based on the stock and share options held by Smithfield's five top executives. Among the managers, CEO C Larry Pope owns stock valued at US$25.4 million based on the US$34-per-share offer price.

Pope would also get US$11 million for his share options, according to Smithfield's most recent proxy filing in August, which based its calculation on control of the company changing on April 29, 2012. The stock on that date was 38 per cent less than the price that the mainland's biggest pork producer agreed to pay this week. The other four executives also stand to get paid out on their options.

The Smithfield senior managers, among the best-paid in their industry, would stay on after the takeover, the company said.

That is despite Smithfield posting a negative return of 18 per cent in the five years through to March 28, the second-worst performance of any US food company with annual sales of US$10 billion or more.

Smithfield's executive vice president, Joseph Luter IV, a descendant of the family that founded the Smithfield, Virginia- based company, owns stock valued at US$21.1 million. He would get a US$1.1 million payment on his options.

The firm's chief financial officer, Robert Manly, has US$13.4 million of stock and would get a change-of-control payment of US$5.3 million, filings show. The other executives are the company's chief operating officer, George Richter, and Joseph Sebring, president of the company's John Morrell unit.

Chairman Joseph Luter III, Luter's father and Pope's predecessor as CEO, has US$30 million of stock.

The deal needs approval from Smithfield shareholders and regulators including the Committee on Foreign Investment in the US.

Shuanghui said China needs food-safety technology from overseas.

"Chinese food companies need to go outside to learn advanced technology and experiences on food safety," chairman Wan Long said on Thursday.

Shuanghui apologised in March 2011 over illegal additives found in its meat and halted output after China Central Television reported that farmers in central Henan province fed an additive to their pigs and then sold them to a slaughterhouse owned by the group. The company subsequently pledged to step up quality control.

"Each country has its own standards" on feed additives used in hog raising, Wan said yesterday.