AP Business Writer
BEIJING (AP) -- The force behind China's biggest takeover of an American company is a 71-year-old meat-packing entrepreneur dubbed "China's Chief Butcher" by the press who built an empire on his country's voracious appetite for pork.
The $4.7 billion bid for Smithfield Foods by Wan Long, chairman of Shuanghui International, is another big step up for Chinese entrepreneurs who are emerging from the shadow of state-owned corporate giants and expanding on the global stage.
Under pressure to keep economic growth strong, the new government of President Xi Jinping has promised a bigger role and lighter regulatory burden to entrepreneurs who generate China's jobs and wealth. Still, it is unclear how far the ruling Communist Party is willing to go in making crucial changes including curbing the dominance of state industry.
"If these Chinese entrepreneurs who are highly capable are allowed to get on and do what they do best, we're going to see a lot more deals like this," said Charles Maynard, senior managing director of Business Development Asia, which advises companies on acquisitions. "Despite lots of hurdles, they are increasingly able to think globally and act globally."
Another private investor, Fosun International, bought a stake last year in Club Med and says it will team up with insurer AXA to acquire the rest of the French resort operator. Last year, a private firm set the current record for the biggest Chinese takeover of an American company when Wanda Group bought the AMC cinema chain for $2.6 billion.
China's private companies follow a different path from Western buyers pursuing acquisitions.
Cash-rich but inexperienced, they shop for brands, technology and skills to speed their development. Unlike Western buyers, which might lay off employees, Chinese companies keep them and sometimes hire more. Sweden's Volvo Cars expanded its workforce after it was acquired in 2010 by Chinese automaker Geely Holding Group.
"We were especially attracted to Smithfield for its strong management team, leading brands and vertically integrated model," said Shuanghui's Wan in the statement announcing this week's bid.
The purchase was endorsed by Smithfield's board but still require approval from shareholders and U.S. regulators.
Reflecting the sensitivity of Chinese acquisitions at a time of American complaints about computer hacking and market access, the companies said they would submit the proposed deal for a U.S. government national security review.
The announcement comes as President Barack Obama and China's Xi prepare to meet for the first time, overshadowed by mounting American frustration about a wave of cyber intrusions traced to China and possibly its military that targets government and commercial secrets. Obama is expected to press Xi to crack down on cybercrime.
The Chinese acquisition of a major food producer "is a bit concerning," said U.S. Sen. Chuck Grassley in a statement. He said regulators should look at what role the communist Beijing government plays in Shuanghui and whether the acquisition might affect national security.
Some, however, warn against linking the deal to strains in the U.S.-China relationship.
"This is just not the kind of deal that would or should rankle the U.S. government," said James Zimmerman, a lawyer in Beijing for the firm Sheppard Mullen and a former chairman of the American Chamber of Commerce in China, in an email.
"The U.S. government would do more harm than good if they use this transaction to leverage out of China better behavior on unrelated issues," said Zimmerman. "Promoting free trade and open investment only comes from setting an example."
Despite their role in driving growth, private companies like Shuanghui still are second-class corporate citizens behind state companies that benefit from monopolies and low-cost access to bank loans, land and energy.
The World Bank and other advisers have warned that model requires drastic change if China's growth is to stay strong. They say more industries have to be opened to private and possibly foreign competitors.
A statement by the Cabinet's planning agency on May 24 promised such change. But it consisted mostly of repeating previous pledges and gave no details of possible reforms. Those are likely to provoke fierce opposition from party factions that depend on state industry to supply money and jobs to reward their supporters.
Entrepreneurs' expansion abroad comes as China's explosive double-digit economic growth that powered their rise slows.
The slowdown is largely self-imposed as Chinese leaders try to nurture more self-sustaining growth based on domestic consumption instead of exports and investment. But consumer spending growth is slow. That has forced Beijing to prop up China's rebound from its deepest downturn since the 2008 global crisis with spending on building subways and other public works, which pumps still more money into state industry.