Shuanghui purchase of Smithfield may face obstacles

The biggest planned purchase in the United States by a Chinese company has raised concerns that local state laws may complicate the deal. Shuanghui International's 4.7 billion dollar takeover bid of U.S. pork giant Smithfield Foods, also faces opposition from some U.S. lawmakers and locals in the company's hometown of Smithfield, Virginia. But scrutiny by a federal government panel charged with assessing national security risks, is unlikely to block the deal. Nina-Maria Potts has more:

Smithfield Foods says it's grown as big as it can get in the US market and a merger with Shuanghui would give it access to millions of meat-eating consumers across Asia. The deal has raised eyebrows on Capitol Hill among SOME US lawmakers oppose the bid.

Small farmers are worried their own businesses will suffer- and locals in the town of Smithfield say they don't know what the future holds under new Chinese bosses. There is a chance that Midwest state laws banning foreign ownership of farmland could also complicate the deal- especially if there's enough local opposition to invoke those laws. There could be legal challenges in those states where Smithfield owns pig farms or crops. But the US FEDERAL government is unlikely to block the deal on national security grounds.

One of the issues is that Smithfield is what's known as a 'vertical' company, in that its whole business model is based around owning every level of the production process- it doesn't just package the ham and pork, it actually owns farms, slaughterhouses, factories and land- that way it has tight control over the quality of its meat- and years of expertise in production.

The problem for any potential buyer is that the US is made up of a patchwork of state laws- which means where ever smithfield has farms, there could legal challenges down the road. Experts say those state laws should NOT complicate closing on the deal in the second half of this year as expected- but there could be gliches futher down the line, which could make Shuanghui think twice about its offer.