According to the Kechuang Board Daily on July 16th, WH Group, a global pork food company, has announced that it has proposed to spin off its American and Mexican pork business, Smithfield Foods, and independently list it on the NYSE or Nasdaq.

This spin-off is expected to help Wan Long, the head of the Shuanghui series, receive an IPO. Previously, Wan Long had led Shuanghui International(000895) and WH Group(00288.HK) to go public on the A-share and H-share markets respectively.

At present, WH Group is the parent company of Shuanghui Group in China, with a market cap of 82.3 billion yuan and 69.2 billion Hong Kong dollars. This means that Mr. Wan Long, an 84-year-old man, controls a "pork processing" empire worth nearly 150 billion yuan.

Smithfield Foods aims to raise $1 billion.

As of now, the business of WH Group is divided into three sectors: domestic meat processing company Shuanghui Group (000895), non-listed logistics and other subsidiary industries, and the US and international businesses represented by Smithfield Foods, which are operated in the UK, Poland, Slovakia, Hungary, Romania, Mexico and other countries.

Regarding this spin-off IPO, WH Group stated that the management had discussed it publicly for six months. Although the spin-off details have not been announced yet, WH Group has confirmed that the spun-off sector is still a subsidiary of the company.

As one of the largest meat product companies in China, Shuanghui Group is an important subsidiary of WH Group in China.

According to the financial report in 2023, the total revenue of Shuanghui Group(000895) reached 60.097 billion yuan, and the net profit attributable to the parent was 5.053 billion yuan, indicating that under the downturn of pork prices, the actual profit margin of Shuanghui Group, which had a revenue of up to 60 billion yuan, was only 8%.

This situation also happened to Smithfield Foods. In WH Group's financial report in 2023, the operating loss of its American pork business reached $624 million, dragging the revenue of the parent company down by 6.8% YoY to $26.236 billion. Its operating profit was $1.471 billion, down by 29.7% YoY.

An investor told Kechuang Board Daily that Smithfield Foods' spin-off IPO is important for WH Group. "On the one hand, the IPO financing can effectively help the US pork business that has been in a loss for most of the time; on the other hand, the independent financing channel will further support the development of WH Group's overseas businesses."

Currently, the Smithfield Foods IPO plans to raise at least $1 billion. Bank of America and Goldman Sachs Group have been chosen as advisors.

In the first quarter of 2023, WH Group's pork business in the US began to improve. The operating loss narrowed significantly from $218 million in the first quarter of 2023 to $62 million, which increased the possibility of a successful IPO for Smithfield Foods.

The 84-year-old head of the empire is expected to receive an IPO.

Behind Smithfield Foods' planned IPO is an 84-year-old man.

Resume shows that Mr. Wan Long, the head of WH Group, was born in September 1940. He has a college education. As the founder of Shuanghui Group, he is known as the "father of China's meat industry".

WH Group's 2023 annual report shows that Wan Long controls WH Group through a series of holding platforms, including Cantrust (Far East) Limited, Xiongyu Company, and XingTai Group. Among them, Cantrust (Far East) Limited is the trustee of Wan Long Trust and holds a shareholding of 27.41%; Xiongyu Company's sole shareholder is XingTai Group, which is held by Wan Long and senior executives of Shuanghui Group such as Ma Xiangjie.

The above-mentioned investors believe that Wang Long, as the founder and former chairman of the board of directors of WH Group, has a decisive impact on the business development of WH Group. This IPO plan by Smithfield is another capital operation by the 84-year-old "old man".

However, in 2021, the 80-year-old Wang Long experienced an "internal struggle". At that time, the chairman of Shuanghui Development (000895), Wang Hongjian, the eldest son of Wang Long and former vice chairman of the board of directors of WH Group (00288.HK), suddenly posted an article online called "My Father and Wang Long".

This "article" criticized his father Wang Long for disregarding the family, leading strategic planning, benefit transmission, related party transactions, and invasion of workers' interests, causing a stir in the market. But the final result was that the eldest son was "dismissed".

In 2021, WH Group announced that Wang Hongjian was relieved of his positions as executive director, vice chairman of the board of directors, and group vice president. At the same time, it stated that Wang Hongjian's accusations against the group were untrue and misleading, and reserved the right to take legal action against Wang Hongjian and/or those responsible for the accusations.

As of now, in the nearly 15 billion yuan "pork processing" empire of Wang Long, his second son Wang Hongwei only holds a 0.02% equity interest in WH Group, while Ma Xiangjie, the president of Shuanghui Development, directly holds 39.2% of the shares; Guo Lijun, who has followed Wang Long for many years, holds over 5% of the shares.

From meat factory to private pork food leader, Wang Long's "capital bureau"

Under the nearly 15 billion yuan "pork processing" empire, Wang Long is also a self-made man. In 1940, Wang Long was born in a poor family in Luohe, Henan. He started as an ordinary clerk at the Luohe Meat Union Factory in his early years and then introduced the foreign concept of "fresh meat" into China.

In 2014, Wang Long led WH Group to go public in Hong Kong, and in 2016, it entered the Fortune Global 500. According to the "Hurun Global Rich List 2024", Wang Long and his wife Wang Meixiang were listed with a wealth of 9.5 billion yuan.

Underlying his wealth, Wang Long relied on the restructuring of state-owned enterprises with Dongfeng to successfully carry out capital operations. In 2006, Wang Long introduced two strategic investors, Goldman Sachs and CDH Investments, to Shuanghui Group, a state-owned enterprise. The latter acquired the shares of Shuanghui Group through Hong Kong Rotex Company and made Shuanghui Group a foreign-owned enterprise.

At that time, the Ministry of Commerce approved Goldman Sachs and CDH Investments to acquire 100% of the equity of Shuanghui Group held by the Luohe State-owned Assets Supervision and Administration Commission through Rotary Vortex Limited for RMB 2.01 billion; at the same time, it also approved Haiyu, the second largest shareholder of Shuanghui Development, to transfer its 25% equity held to Rotary Vortex Company at a price of RMB 5.62 per share.

As a result, Rotary Vortex directly and indirectly holds 60.72% of the shares of Shuanghui Development, and this shareholding has made Shuanghui Group change from a state-owned enterprise to a private one.

Later, as a core figure of Shuanghui Group, Wang Long made Shuanghui Group and its subsidiary, Shuanghui Development (000895), controlled by WH Group through a series of changes in equity and capital operation. Correspondingly, Goldman Sachs and CDH Investments also made a lot of profit in this acquisition case.

Data shows that after WH Group went public in Hong Kong, CDH Investments began to sell its shares in 2016, cashing out more than HKD 10 billion in total; after participating in the acquisition of Shuanghui Group in 2006, Goldman Sachs sold most of its shares (000895) of Shuanghui Development in 2009, with a profit of 0.15 billion US dollars.

At the end of 2009, Shuanghui shares once announced that Goldman Sachs reduced its holdings on a large scale that year, and finally only had 15% of the shares. There are also reports that Goldman Sachs' return on investment in Shuanghui reached 240%.

In 2013, Wang Long once again strengthened WH Group's position in the global pork food industry by acquiring the US Smithfield Food Company through WH Group.

As of now, WH Group has a complete industry chain from pig farming to meat processing, covering business in China, the United States, Mexico, Europe and other places. At the same time, in response to the market trend, Smithfield has also entered the "plant-based meat" market. Currently, Smithfield has launched a series of plant-based meat products called "Pure Farmland".

With Smithfield's impact on the US stock IPO and potentially listing the fastest this year, Wulong may have another IPO on the horizon.