Shuanghui to cut stake in Spain's Campofrio

MADRID Fri Sep 27, 2013 7:40am EDT

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MADRID (Reuters) - The Chinese group that inherited the largest single stake in Spanish food company Campofrio CPF.MC plans to sell enough shares to avoid making a forced takeover, though some analysts viewed the move merely as a postponement.

Shuanghui International Holdings 000895.SZ inherited 37 percent of Campofrio on Thursday's completion of its $4.7 billion purchase of U.S. pork producer Smithfield Foods SFD.N and under Spanish securities law has three months to launch a full takeover bid or cut its stake to less than 30 percent.

The Chinese company's announcement on Friday that it intends to take the latter route limits the prospects of a takeover in the near term and sent Campofrio's shares down 4 percent.

Yet analysts at Portuguese bank BPI said that Shuanghui could simply be buying time to assess the outcome of a Campofrio restructuring and the integration of Smithfield.

"We see this merely as a delay of the M&A angle ... that should materialise at some point in the future," BPI said in a research note, adding that it does not rule out another party trying to buy Campofrio in the meantime.

BPI noted that investment management firm Oaktree Capital (OAK.N), which owns 24 percent of Campofrio, should be a seller at the right price and that Campofrio is the main meat processor in Europe, offering strategic interest for other global meat processing companies.

After a drawn-out economic crisis during which foreign investors shunned Spanish assets, a number of overseas buyers are starting to close deals in Spain, drawn by bargains and predictions that the country is emerging from five years of stop-and-go recession.

Colombian financier Jaime Gilinski recently committed to becoming the biggest shareholder of Spanish bank Sabadell (SABE.MC) and China's richest man, Wang Jianlin, told Spanish news agency EFE this week that his next investment targets were Belgium and Spain.

Spain's Economy Ministry says that Hong Kong invested a total of 236 million euros in Spain the first six months of 2013, up from 40 million euros in the same period last year. OECD data shows that China spent $124 million on direct investment in Spain in 2011, up from $6.2 million in 2005.

The purchase of Smithfield, which aims to satisfy China's increasing appetite for pork, is the biggest acquisition of a U.S. business by a Chinese company. Including debt, the deal is valued at $7.1 billion.

Campofrio shares were down 4.4 percent at 5.45 euros by 0929 GMT.

(Reporting by Tracy Rucinski and Clare Kane in Madrid and Martinne Geller in London; Editing by David Goodman)

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