(Reuters) - Last-minute legislative maneuvers in Missouri may remove one potential legal obstacle to Shuanghui International Holdings' proposed $4.7 billion purchase of Smithfield Foods Inc SFD.N, which would be China's largest purchase to date of a U.S. company.
Smithfield’s lawyers and officials with the state Attorney General’s office are monitoring a pair of bills that could open the door for non-U.S. businesses to own up to a total of 1 percent of the state’s agricultural lands - or about 300,000 acres of farmland, an area the size of New York City.
Missouri’s Agriculture Department would need to approve such land sales. The bills have passed both houses of the legislature and are awaiting the governor’s signatures.
Missouri and at least seven other U.S. states - Iowa, Nebraska, Minnesota, North Dakota, Oklahoma, South Dakota and Wisconsin - have oft-overlooked laws that prohibit foreign ownership of agricultural land.
The decades-old statutes are virtually untested and some foreign farmland owners work around them by shifting their property into majority-U.S. owned subsidiaries. Nevertheless, the laws loom as a potential complication to the proposed merger of the biggest pork producers in China and the United States.
State representative Casey Guernsey, chairman of the Missouri House agri-business committee, was the House handler of the two Senate bills that aimed to change the state’s foreign farmland ownership rules.
His committee added language that opened foreign ownership from zero to a total of one half of one percent. Guernsey himself then amended the total allowable foreign ownership to one percent, legislative records show.
Senate Bills 9 and 342 were passed by the legislature on the last day of its session - less than two weeks before the Smithfield deal was announced on May 29. Smithfield does not disclose specifics of its property holdings, but Missouri court filings show that it does own some agricultural land through a subsidiary.
Guernsey, whose rural county in northern Missouri has Smithfield and its pork-producing subsidiaries as the largest taxpayers, said work on the amendments began last year in response to foreign interests who already effectively hold about 91,000 acres out of the state’s estimated 29.1 million farmland acres and wanted the laws changed.
Guernsey said the current law is not stopping purchases by foreign buyers and that the bills would add a new layer of accountability by requiring state Department of Agriculture approvals for such sales.
Smithfield and Shuanghui declined comment for this story.
The legislative effort was not connected to Smithfield, said Guernsey. Smithfield was his largest campaign contributor in the 2012 election cycle with $3,000 in donations, according to followthemoney.org, a campaign finance database.
The bills were sent to Governor Jay Nixon’s desk on May 22 and he has until July 14 to act.
Smithfield gave more money to Nixon than to any other Missouri candidate, with total donations of $32,500 during the 2012 election cycle, but the company was not among his top 20 contributors, according to followthemoney.org.
Nixon’s press officer did not respond to requests for comment.
A spokesman for Missouri’s current Attorney General Chris Koster, a Democrat, said Koster is following progress of the bills and would not comment further.
Guernsey said news of the Smithfield-Shuanghui deal caught him by surprise, but Smithfield officials convinced him not to worry and that they believed pork production in Missouri would grow by 20 percent or more after the takeover, he said.
Guernsey said Smithfield officials also told him that they expected to comply with Missouri’s foreign farmland ownership law regardless of what happened with the new legislation.
“With a lot of big groups, anybody who has enough money can hire enough lawyers and get their way,” Guernsey said. “We’ve seen a lot of these companies find ways around these laws. At least now, the rules are more clear.”
Reporting by Lisa Baertlein in Los Angeles and P.J. Huffstutter in Chicago; Editing by David Greising and Claudia Parsons
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