(华尔街日报 2013-07-11) Nine years ago, frustrated in his effort to expand across China, rising pork tycoon Wan Long met with a provincial official.
'Are you having any problems?' asked Henan province Party Secretary Li Keqiang.
'There's this,' Mr. Wan began, then hesitated.
'I'm here to fix your problems,' Mr. Li said, according to the official Xinhua news agency. 'Speak, Old Wan,' using a Chinese expression of respect.
Mr. Wan explained that his meat-processing company had expanded in Sichuan and other provinces. But in its home province of Henan, he said, he had been blocked by municipal governments trying to protect local slaughterhouses.
Mr. Li told the head of the provincial economic planning agency to make sure local authorities didn't erect barriers, according to official media.
Mr. Li is now China's premier.
And Mr. Wan, the chairman of Shuanghui International Holdings Ltd., is poised to become a leader in the global food industry. The 72-year-old is leading a $4.7 billion effort to acquire Smithfield Foods Inc. ─a deal that would create the world's No. 1 pork producer and mark the biggest purchase ever of a U.S. company by Chinese buyers.
Smithfield Chief Executive Larry Pope told a Senate panel Wednesday that the takeover would help expand the U.S. pork industry and said that Smithfield would continue to uphold high food-safety standards. A group of senators has requested that agriculture and food regulators be allowed to participate in a review of the deal by the Committee on Foreign Investment in the U.S., a interagency panel led by the Treasury Department.
A review of Mr. Wan's history paints a portrait of a savvy operator and deal maker who has turned to powerful Chinese political leaders and well-funded Western investors to realize his ambitions. They have helped him build his company from a single slaughterhouse to China's biggest pork processor, engineer a politically tricky management buyout and rebuild the company after a scandal over tainted meat.
People familiar with his background say Mr. Wan─who holds a seat on the National People's Congress, China's legislature─comes from modest roots. They describe a modest homebody who still runs the company from the same city where he grew up. The grandfather, who didn't finish high school, walks daily for 30 minutes after each meal, often on a track around the office with an assistant in tow so he can keep working.
A spokesman for Shuanghui says the company is limiting its media contact until the Smithfield deal is approved by U.S. regulators and that Mr. Wan isn't available for an interview. The spokesman says, though, that Shuanghui doesn't have political pull beyond that of any other Chinese agricultural company and that the government isn't involved in the Smithfield bid.
Mr. Wan, a native of Luohe, in Henan province, joined the Chinese army in the early 1960s where he helped build and repaired train tracks.
He left the army in 1968 and after returning to Luohe, got an office job working for the local abattoir. In 1984, employees of the slaughterhouse elected him as its manager, the people familiar with his background say.
From the start Mr. Wan focused on making the state-owned slaughterhouse─one of the smallest of the 10 in Henan─profitable, despite the constraints of operating under a planned economy. With domestic prices set by Beijing, Mr. Wan started exporting pork to Russia and beef to Israel where the company could charge market rates. The company no longer produces beef.
In the early 1990s new meat-processing technology allowed Shuanghui and its rivals to make sausages with a longer shelf life, allowing sales farther away. Mr. Wan amped up production. The machines came with a 12-month warranty, but before the year was out, the Japanese manufacturer had to send engineers to make repairs. The warranty was based on the unwritten assumption that the machines would run eight hours as day, but Mr. Wan had them working around the clock, the people say. The manufacturer subsequently redrafted its warranty to be based on hours in operation.
By the time Mr. Li visited Shuanghui in 2004, the company had expanded well beyond Luohe, setting up production bases first in Sichuan and then other provinces to meet rising demand for pork from China's increasingly affluent cities.
Mr. Wan 'is a strong-willed fighter, determined from the very beginning to break the local protectionist barriers erected by state-owned slaughtering [and] processing companies,' says Fred Hu, a former executive Goldman Sachs Group Inc., which helped Mr. Wan engineer the privatization of Shuanghui. 'Rare among his peers, Wan is focused on quality control and brand building.'
In 2006 Mr. Wan moved to buy out the company, getting the local government to sell its stake in Shuanghui to Goldman Sachs and Chinese private-equity firm CDH Ventures for a combined two billion yuan ($326 million).
That deal and a transaction four years later that gave a group tied to Mr. Wan a greater stake in Shuanghui led to public scrutiny in China, where sensitivity is high over perceptions that foreign investors are profiting by buying and selling businesses that once belonged to the people.
Mr. Wan in 2010 defended the deals. 'Shuanghui has a very competitive team,' he said at a news conference. 'If the state-owned stakes in Shuanghui were sold to competitors instead of finance investors, they will control Shuanghui, they will destroy our brand,' he said.
Mr. Wan's management group now owns about 30% of the company but holds control, according to company filings. Goldman Sachs holds 5.18% and CDH, 33.7%. A private-equity firm co-founded by Winston Wen, the son of former premier Wen Jiabao, invested after the buyout and held 4.15% at the end of last year.
Such financial backing has helped Shuanghui invest in machinery and technology. A former executive with a U.S. meat-processing firm says Shuanghui's plants typically use the best equipment available, most of which is imported from the U.S., Europe and Japan.
That didn't prevent Shuanghui from becoming enmeshed in 2011 in one of China's numerous tainted-food scandals. Chinese health inspectors discovered clenbuterol─a chemical used to produce leaner meat but banned in China and the U.S. for causing headaches and nausea─in the company's pork products.
Mr. Wan addressed the issue head on. The company apologized and said it discontinued partnerships with the hog suppliers that had used the additive. He later told Chinese media that he had beefed up inspections and arranged to receive daily text messages of the results.
Central-government officials also helped, directing local journalists to stop reporting the story, according to three people who received the order. The Shuanghui spokesman says the company didn't request the halt.
The following year Premier Wen praised Shuanghui for introducing measures to screen every hog.
Shuanghui 'has made up its mind to be a company that the people can trust for its safety and quality,' he said, according to an account on Shuanghui's website. 'Through the strenuous efforts of thousands of workers…we will be able to make more Shuanghuis.'
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