That’s how Richmond physician Frank S. Royal views the global transaction involving Virginia-based Smithfield Foods Inc., the worlds’s largest pork producer and processor known for such brands as Armour, Gwaltney and Farmland.
That’s to be expected. Dr. Royal, 73, is among the company decision-makers who stamped their approval
on the $4.7 billion sale of Smithfield to China’s largest pork producer, Shuanghui International Holdings Ltd. He serves on Smithfield’s board and joined the other nine members more than three weeks ago in voting for the Chinese company’s purchase — a deal that has drawn wide attention along with scrutiny from an array of lawmakers and consumers groups.
If it goes through, as Dr. Royal and others anticipate, the impact would reach far beyond this country.
Smithfield is huge, slaughtering 27 million pigs a year and producing more than 3.6 million tons of bacon, sausages and other pork products — double Shuanghui’s current annual output.
Why agree to sell to a Chinese firm? “We did it to maximize shareholder value,” Dr. Royal said last week in a brief telephone interview from his Windsor Farms home. Shuanghui’s agreed to pay $34 a share for the company, an increase of about $8 a share over the $25 price Smithfield’s stock was selling at before the deal was announced.
While some are carping that the price is too low, Dr. Royal disagrees. “It’s a fair valuation,” he said flatly.
Dr. Royal would be among the beneficiaries if the sale closes in October as he hopes. According to Smithfield, he currently holds 21,595 shares of the company’s stock that Shuanghui has agreed to purchase. At $34 apiece, the shares would be worth $734,230. Before the deal, the shares were nominally valued at about $540,000 or about $194,000 less.
Dr. Royal, well known in Richmond for the family practice he operated in Church Hill for 42 years, also has served on Smithfield’s board since 2002, one of several corporate and institutional boards of which he has been a member.
Smithfield states Dr. Royal is paid $158,000 a year for his board service as well as stock that becomes available when he leaves the board. His service, like other current board members, is likely to end if the sale goes through, since Shuanghui plans to buy up all the stock and run Smithfield as a private company.
Dr. Royal acknowledged that Shuanghui has faced food quality issues in China, one point raised by critics of the deal. Dr. Royal, though, said he is confident the new owners “will do well” on food safety issues, particularly because the Smithfield management is being kept in place.
Besides, he said, the Chinese firm wants Smithfield to gain a bigger supply of pork products for consumers in its homeland. “It will boost exports,” he said.
It’s not quite a done deal. The sale still needs approval from a government group that reviews foreign purchases of U.S. companies. And the deal could face potential objections from a few states like Wisconsin that are home to Smithfield subsidiaries and currently bar foreign ownership of agribusinesses and farmland.
Dr. Royal is no stranger to big corporate deals. He is a past member of the board of Dominion Resources, where he chaired the compensation committee. He also is a former director for hospital giant HCA as well as banking giant SunTrust, railroad giant CSX and specialty paper and packing producer Chesapeake Corp.
He’s once again the chairman of the board of his medical school alma mater, Meharry Medical College in Nashville, Tenn., a post he held previously for 16 years. He also served 30 years as board chairman of Virginia Union University, his undergraduate alma mater. He gave up that post two years ago and is now an honorary member of the board.
He also is a past president of the National Medical Association and a former board chairman of once independent Richmond Community Hospital and of the now-defunct Richmond Community Hospital Foundation.