The bottom of the pig cycle has been identified, and the performance of breeding companies is starting to recover.

As the world's largest pork food company, WH Group has also become active in the capital market.

Recently, it plans to spin off its subsidiary Smithfield for a U.S. stock listing. If this spin-off is completed, the "Pork King" Wan Long, in addition to holding A-share listed company Shuanghui Development and H-share listed company WH Group, will gain another U.S.-listed company.

Regarding this spin-off, WH Group stated, the management has publicly discussed it for half a year.

According to relevant information, Smithfield's IPO plans to raise at least $1 billion. Currently, the company has selected Bank of America, Goldman Sachs Group, and other investment banks as advisors.

After the spin-off and listing, Smithfield will remain a subsidiary of WH Group.

It is reported that WH Group is an investment holding company. Its business is divided into three major segments: domestic meat processing company Shuanghui Development, U.S. and international business represented by Smithfield, and non-listed logistics and other affiliated industries.

Regarding Smithfield, this company has been controversial within WH Group. In 2021, when Wan Long dismissed his eldest son Wan Hongjian from all positions at WH Group, this company was thrust into the spotlight. Previously, the conflict between Wan Hongjian and Wan Long also stemmed from the acquisition of this company.

Relevant information shows that in 2013, Shuanghui International (the predecessor of WH Group) acquired the world's largest pork processor Smithfield for $7.1 billion, setting a new record for Chinese companies acquiring U.S. businesses at the time.

From the perspective at the time, although this deal could mitigate domestic pig cycle fluctuations, reduce the negative impact of rising pork prices on performance, and compensate for weaknesses to ensure stable raw material sources, the downside was that it did drag down Shuanghui Group's overall performance in the short term.

The conservative are right in the short term, but the aggressive win the future.

According to WH Group's 2020 financial report, revenue in China was $4.037 billion, up 11.7% year-on-year, with operating profit of $836 million, up 24.3%; while revenue in the U.S. was $7.157 billion, down 8.4% year-on-year, with operating profit of $571 million, down 32.6%.

Smithfield's underperformance and the significant funds spent by WH Group on its acquisition ultimately led to Wan Hongjian's strong opposition to further investment in Smithfield, while Wan Long remained adamant about investing in the company.

Clearly, Wan Hongjian opposed this "snake swallowing elephant" game, but his opposition did not decisively influence Wan Long, ultimately leading to an irreconcilable conflict between father and son.

From today's perspective, Wan Long's ability to control the overall situation is clearly superior, while his son's industry insights still need refinement. As the actual helmsman of this "pork empire," the 84-year-old Wan Long remains active on the front lines, with undiminished energy.

It is undeniable that the spin-off of Smithfield will undoubtedly elevate his "pork empire" to new heights.

"Pork King" Wan Long

As the soul of WH Group, the development of the Shuanghui system is inseparable from Wan Long.

Its official website shows that WH Group is the world's largest pork food company, ranking first in market share in China, the U.S., and Europe. It has a complete pork industry chain, including pig farming, fresh pork, pork products, distribution, and sales, and has formed a leading competitive advantage in the pork industry through its unique global vertically integrated business platform.

Currently, WH Group has three segments: Shuanghui Development, Smithfield, and non-listed logistics and other affiliated industries. These three segments form a vast "pork empire."

Notably, this "pork empire" was almost single-handedly built by Wan Long.

According to relevant information, Wan Long was born in 1940 into a poor family in Henan. As a child, he often went hungry. Before graduating from high school, he dropped out to join the army. After retiring, he was assigned to work at the Luohe Meat Processing Plant.

Wan Long worked very hard, and after 20 years of struggle, he eventually became the director of the meat processing plant. However, the company was not doing well at the time. Due to outdated equipment and technology, it suffered continuous losses and was once on the verge of bankruptcy with liabilities exceeding assets.

In 1984, the Luohe Meat Processing Plant was transferred from Henan Province to Luohe City. As a pilot unit for contract reform, the plant underwent a milestone reform, and Wan Long undoubtedly became the leader of the company.

The first thing Wan Long did after taking office was to break the unreasonable pig procurement system and implement negotiated purchases. Secondly, he also abolished the traditional "iron rice bowl" system, firing a large number of lazy employees and promoting many young people. At the time, Wan Long offended many well-connected individuals. According to Dahe Daily, some called his home to threaten him, others threw bricks at his house, and some employees even threatened him with butcher knives. Countless complaint letters were sent to various departments.

Despite this, the strong-willed Wan Long did not compromise.

In the end, within just one year, the Luohe Meat Processing Plant, which had been losing money for years, miraculously turned a profit. After turning a profit, Wan Long did not stop. While other meat processing plants across the country engaged in "price wars," he set his sights on overseas markets early.

In 1985, after overcoming significant difficulties in technological transformation, the Luohe Meat Processing Plant secured a 50-ton export quota for processed meat, with products sold to Southeast Asia and the former Soviet Union, embarking on a development path relying on foreign trade. By 1989, the Luohe Meat Processing Plant was renamed Shuanghui, and the Shuanghui brand was established.

It is worth mentioning that Wan Long was not only aggressive in business development but also in capital reform. Shuanghui was one of the first domestic companies to introduce foreign investment and underwent equity restructuring.

After years of restructuring, Shuanghui's current equity structure is very complex, including foreign capital and other investments. Wan Long and employees also hold significant shares. But in a sense, it was not until the successful equity restructuring of Shuanghui in 2010 that Wan Long truly reached the pinnacle of power, becoming the big winner with absolute control over Shuanghui and WH Group.

In 2013, Wan Long pushed through opposition to acquire the largest U.S. pork company, Smithfield, for $7.1 billion in a "snake swallowing elephant" deal. Since most of the funds were borrowed, Wan Hongjian strongly opposed it. To some extent, this acquisition affected the father-son relationship and changed Shuanghui's development trajectory.

But it must be said that it is precisely Wan Long's aggressive personality that has given WH Group its current global industry position.

International "Vision"

On July 14, Hong Kong-listed WH Group announced plans to spin off its U.S. and Mexico subsidiary Smithfield for a separate listing on the NYSE or NASDAQ.

Choosing to IPO at this time is an excellent opportunity.

Not only is the industry at an inflection point, but the U.S. stock market is also at a high level, which would result in a higher valuation.

Therefore, in October last year, Smithfield publicly stated that it had the opportunity to advance its listing in 2024.

For this company, a successful IPO would provide the U.S. pork business, which has mostly been in a loss-making state, with a timely cash infusion of over $1 billion. Additionally, an independent IPO would provide a favorable international development environment.

This can be referenced to Joyoung's holding company JS Global Lifestyle, which spun off SharkNinja for a separate U.S. listing. SharkNinja's market value has since exceeded $10 billion, surpassing JS Global Lifestyle's total market value at the time.

According to WH Group's 2023 financial report, the operating loss of its U.S. pork business reached $624 million, dragging down the parent company's revenue, which fell 6.8% year-on-year to $26.236 billion, with operating profit at $1.471 billion, down 29.7%.

In the financial report, WH Group admitted, "U.S. pig farming costs remain high, pig prices have fallen significantly year-on-year, the pig farming industry is deeply in the red, and operating profits have declined sharply."

Thus, Wan Long's decision to spin off Smithfield for a U.S. listing at this time is truly killing multiple birds with one stone. More importantly, Smithfield's U.S. listing would enhance the company's valuation and further elevate its international market position.

Additionally, it is worth noting that WH Group's U.S. pork business is improving, with operating losses narrowing sharply from $218 million in Q1 2023 to $62 million.

In other words, choosing to IPO now coincides with the business turning from decline to growth.

Looking ahead, this will help the company better expand into international markets.

According to relevant information, Wan Long currently has two listed companies: WH Group with a market value of HK$63.7 billion (approximately RMB 59.2 billion) and Shuanghui Development with a market value of RMB 81.1 billion, totaling over RMB 140 billion.

According to the Hurun Global Rich List 2024, Wan Long and his wife Wang Meixiang ranked 2,573rd globally with a net worth of $950 million, up 201 places from last year. Today, the 84-year-old Wan Long still firmly controls this vast "pork empire."