Blog: Katy AskewIs Chinese meat company WH Group eyeing US M&A?

Katy Askew | 6 May 2016

Rumours Chinese pork giant WH Group is eyeing acquisitions, particularly in the US, have surfaced.

WH Group, which did not respond to requests for comment, became the world's largest pork processor when it acquired US firm Smithfield Group in 2013. Over the past two years, the Hong Kong-listed meat firm has focused on paying down debt taken on to fund the Smithfield deal and integrating the US business's sizeable global operations.

When WH Group delivered its results for 2015 at the end of March, it was clear headway has been made on these objectives. The company has strengthened its financial position and “gradually revealed” synergies helped it deliver an expectation-beating 17.5% rise in net profit.

The company did, however, reveal sales came under pressure in a period marked by "challenging industry and macroeconomic environments". An answer to such concerns is to turn to M&A. Through acquisitions, WH Group could look to consolidate its lead in the global pork sector. However, according to analysts at BB&T Capital Markets, WH Group will more likely look to diversify its revenue stream.

“The company has increasingly been talking about global acquisition opportunities, with an eye on North America in addition to other regions. The company is looking to broaden its scope beyond pork,” the analysts wrote in a recent investor note.

The question then becomes which companies WH Group could be targeting. Is WH Group looking for a transformational strategic opportunity or a smaller bolt-on deal?

Within the US, BB&T suggested WH Group's comments "have implications" for Tyson Foods, Pilgrim’s Pride, Sanderson Farms and Hormel Foods. If WH Group is looking at North America more broadly, it seems probable Canada's Maple Leaf Foods could be added to this list.

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