The bottom of the pig cycle has been found, and the performance of breeding companies has begun to pick up.

As the world's largest pork food company,WH GroupAlso began to be active in the capital market.

Recently, it plans to spin off its subsidiary Smithfield and list it on the US stock market. If this spin-off is completed, then the "pork king" Wanlong will not only hold A-share listed companiesShuanghui Development, WH Group, a H-share listed company, will gain another U.S.-listed company.

Regarding this split, WH Group said:Management has been discussing this publicly for half a year.

According to relevant information, Smithfield plans to raise at least $1 billion in this IPO. Currently, the company has selectedBank of America, Goldman Sachs and other investment banks as consultants.

Smithfield, which was spun off this time, will remain a subsidiary of WH Group after the spin-off and listing are completed.

It is reported that WH Group is an investment holding company. Its business is divided into three major sectors, namely domestic meat processing company Shuanghui Development, US and international businesses represented by Smithfield, and unlisted logistics and other affiliated industries.

Regarding Smithfield, this company was once controversial within WH Group. In 2021, when Wan Long dismissed his eldest son Wan Hongjian from all positions in WH Group, this company was pushed to the forefront. Previously, the conflict between Wan Hongjian and Wan Long also stemmed from the acquisition of this company.

Relevant data shows that in 2013, Shuanghui International (the predecessor of WH Group) acquired Smithfield, the world's largest pig slaughterer, for US$7.1 billion. At that time, the transaction set a new record for Chinese companies' acquisitions in the United States.

From the perspective of the time, although this transaction could smooth out the fluctuations in the domestic pig cycle, reduce the negative impact of rising pig prices on performance, and make up for shortcomings and ensure a stable source of raw materials, the disadvantage is that the company did drag down Shuanghui Group's overall performance in the short term.

Conservatives are right in the short term, but only radicals can win the future.

According to WH Group's 2020 financial report, China's revenue was US$4.037 billion, an increase of 11.7% year-on-year, and operating profit was US$836 million, an increase of 24.3% year-on-year; while the United States' revenue was US$7.157 billion, a decrease of 8.4% year-on-year, and operating profit was US$571 million, a decrease of 32.6% year-on-year.

Smithfield's performance did not meet expectations, and WH Group spent a large amount of money on its acquisition, which ultimately led to the eldest son Wan Hongjian's strong opposition to further investment in Smithfield, while Wan Long was particularly persistent in investing in the company.

Obviously, Wan Hongjian opposed this game of "snake swallowing elephant", but his opposition could not have a decisive impact on Wan Long, which eventually led to an irreconcilable conflict between father and son.

From today's perspective, it is clear that Wanlong's ability to control the overall situation is superior, and his son's views on the industry obviously need to be refined. As the actual helmsman of this "pork empire", the 84-year-old Wanlong is still fighting on the front line and is still full of energy.

It is undeniable that the split of Smithfield will definitely take his "pork empire" to a higher level.

Bandung, the "Pork King"

As the soul of WH Group, the development of Shuanghui Group cannot be separated from Wan Long.

Its official website shows that WH Group is the world's largest pork food company, ranking first in market share in China, the United States and Europe. It has a complete pork industry chain including live pig farming, fresh pork, pork products, distribution and sales, and has formed a leading competitive advantage in the pork industry with its unique global vertically integrated business platform.

Currently, WH Group has three divisions, namely Shuanghui Development, Smithfield and unlisted logistics and other subsidiary industries. These three divisions have also built a huge "pork empire".

It is worth noting that this "pork empire" was almost single-handedly created by Wanlong.

According to relevant information, Wan Long was born into a poor family in Henan in 1940. He was often hungry when he was a child. He dropped out of school to join the army before graduating from high school. After retiring from the army, Wan Long was assigned to work at the Luohe Meat Processing Factory.

Wanlong worked very hard, and after 20 years of hard work, he finally became the director of the meat processing plant. But the company was not doing well at the time. Due to its simple equipment and backward technology, it suffered losses year after year, and even reached the point of being insolvent and on the verge of bankruptcy.

In 1984, the Luohe Meat Processing Plant was transferred from Henan Province to Luohe City. As a pilot unit for the contract system reform, the meat processing plant carried out a milestone reform, and Wanlong deservedly became the leader of this enterprise.

The first thing Wan Long did when he took office was to break the unreasonable pig purchase and sale system and promote the purchase of pigs by bargaining. Secondly, he also broke the tradition of the big pot meal, fired a large number of lazy employees, and promoted many young people. At that time, Wan Long offended a large number of people with connections. The Dahe Daily reported that some people called Wan Long's home to threaten him, some threw black bricks at his home, and some employees even threatened him in person with a pig-killing knife. There were countless letters of complaint sent to departments at all levels.

Despite this, the tough-minded Wanlong did not compromise.

Finally, it took only one year for the Luohe Meat Processing Plant, which had been losing money for many years, to miraculously turn losses into profits. After turning losses into profits, Wanlong did not stop its pace of progress. When major meat processing plants across the country started a "price war", Wanlong had already set its sights on the overseas market.

In 1985, after overcoming great difficulties and carrying out technical transformation, Luohe Meat Processing Plant obtained the qualification to export 50 tons of cut meat. Its products were exported to Southeast Asia and the former Soviet Union, and it embarked on a development path that relied on foreign trade exports. In 1989, Luohe Meat Processing Plant was renamed Shuanghui, and the Shuanghui brand was established.

It is worth mentioning that Wanlong is not only radical in corporate development, but also very radical in capital reform. Shuanghui is almost one of the first companies in China to introduce foreign capital and carried out equity restructuring of the factory.

After years of restructuring, Shuanghui's equity structure is now very complex, with foreign capital and other capital. Wan Long and his employees also hold a lot of shares. But in a sense, it was not until the successful restructuring of Shuanghui's equity in 2010 that Wan Long really climbed to the top of the power pyramid and became the big winner, gaining absolute control over Shuanghui and WH Group.

In 2013, Wan Long, against all odds, invested US$7.1 billion to acquire Smithfield, the largest pork company in the United States, in a "snake swallowing an elephant" manner. Since most of this money was borrowed, Wan Hongjian firmly opposed it. Therefore, to some extent, this acquisition affected the relationship between Wan Long and his son, and also changed the development trajectory of Shuanghui.

But it must be said that it is precisely because of Wan Long’s radical character that WH Group has achieved its current global industry status.

International Perspective"

On July 14, WH Group, a Hong Kong-listed company, announced that it plans to split off its Smithfield subsidiary operating in the United States and Mexico, which will be listed separately on the New York Stock Exchange or Nasdaq in the future.

Choosing this time to conduct an IPO is an excellent timing point.

Because not only is the industry at a turning point, but the U.S. stock market is also at a relatively high level, and listing at this time will also receive a higher valuation.

Therefore, last October, Smithfield publicly stated that there was an opportunity to advance its listing in 2024.

For this company, if the IPO is successful, the more than 1 billion US dollars raised can directly provide timely blood transfusion for the US pork business, which has been in a loss-making state most of the time. On the other hand, an independent IPO company can provide the company with a good international development environment.

This can be referencedJoyoung SharesHolding CompanyJS Global LifeAfter its spin-off SharkNinja was independently listed in the United States, the company's market value has exceeded US$10 billion, exceeding the total market value of JS Global Lifestyle at the time.

According to WH Group's 2023 financial report, the company's operating losses in its pork business in the U.S. market reached US$624 million, dragging down the parent company's revenue by 6.8% year-on-year to US$26.236 billion, and operating profit was US$1.471 billion, a year-on-year decrease of 29.7%.

In the financial report, WH Group also admitted that "the cost of raising pigs in the United States continues to be high, pig prices have dropped significantly year-on-year, the pig farming industry has suffered deep losses, and operating profits have dropped significantly."

It can be seen that Wanlong's decision to split Smithfield and list it in the U.S. right now is really a win-win situation. More importantly, Smithfield's listing in the U.S. will help increase the company's valuation and further enhance the company's position in the international market.

In addition, it is worth noting that WH Group's pork business in the United States has begun to improve, with operating losses significantly narrowed from US$218 million in the first quarter of 2023 to US$62 million.

In other words, by choosing this time to IPO, its performance is just at the point of turning from decline to prosperity.

Looking into the future, this will help the company better expand its international market.

According to relevant information, Wanlong currently has two listed companies, namely WH Group with a market value of HK$63.7 billion (approximately RMB 59.2 billion) and Shuanghui Development with a market value of RMB 81.1 billion. The combined market value of these two companies exceeds RMB 140 billion.

According to the Hurun Global Rich List 2024, Wan Long and Wang Meixiang are ranked 2573rd in the world with a net worth of 9.5 billion, up 201 places from last year. Today, 84-year-old Wan Long still firmly controls this huge "pork empire".