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By Stephen Aldred and Kane Wu
HONG KONG, May 31 (Reuters) - Bank of China and MorganStanley have combined to provide $7 billion of loans to financeShuanghui International's record deal to buy U.S. pork producerSmithfield Foods, people familiar with the matter saidon Friday.
The total value of the Chinese company's record agreementwas $7.1 billion, including net debt, according to the deal'sannouncement on Wednesday. But the two companies did not offerdetails on how Shuanghui financed the deal.
According to the people familiar with the matter, Bank ofChina has provided up to $4 billion in financing to Shuanghui,in a five-year term loan, and will syndicate the facility.
Morgan Stanley is adding $3 billion in a term loan as well,they said, and will also sell down the amount.
The $7 billion of financing will go to the $4.9 billion incash that Shuanghui agreed to pay Smithfield, with rest going torefinancing Smithfield's debt.
Smithfield has $3.45 billion in gross debt outstanding,which includes corporate and high yield debt, Thomson Reutersdata show. The company has around $1 billion in cash and shortterm investments, the data show.
Morgan Stanley and Bank of China declined to comment on theloan deals. Morgan Stanley also advised Shuanghui on its bid.
The deal will face scrutiny by the Committee on ForeignInvestment in the United States (CFIUS), a government panel thatassesses national security risks. At least one member ofCongress said the deal raised alarms about food safety.
If successful, the agreement would mark China's biggestpurchase of a U.S. company. It also highlights the country'sgrowing appetite for foods such as pork as its middle classexpands, making China more reliant on foreign producers.
Shuanghui International, which controls Henan ShuanghuiInvestment & Development Co, China's largest meatprocessor, would be joining forces with a company that has aglobal herd of 1.09 million sows, according to SuccessfulFarming magazine, and which raises close to 16 million hogs ayear.
Demand for U.S. meat in China has risen 10-fold over thepast decade, fuelled in part by a series of food safety scandals- from rat meat passed off as pork to thousands of pig carcassesfloating down a river. Public anxiety over cases of fake ortoxic food often spreads quickly.
Shuanghui International is an offshore entity registered inHong Kong, and is 5.2 percent invested by Goldman Sachs' maininvesting arm and 33.7 percent-held by funds associated withChina-focused private equity firm CDH. Another Chinese privateequity firm New Horizon Capital holds 4.2 percent, and Singaporesovereign wealth fund Temasek 2.8 percent.
