China-based Zhongpin Inc. (HOGS) has agreed to be taken private by a group that includes its chief executive in deal that values the meat and food processor at about $503 million. CEO Xianfu Zhu, along with Golden Bridge Holdings Ltd., will offer shareholders $13.50 a share in cash, a 24% premium over Friday's closing price and a 47% premium over the closing price March 26, which is the last trading day prior to the company's announcement that it had received a going private proposal from Mr. Zhu. Under the terms of the deal, shares owned by Mr. Zhu and others who are part of an equity contribution agreement will be contributed to Golden Bridge immediately prior to the effective time of the merger. Mr. Zhu owns more than 17% of the company according to FactSet, while the entire buyout group collectively holds about 26%. The $13.50-a-share offer by Mr. Zhu was first unveiled in March. At the time, based on the number of shares outstanding, the offer valued the China-based pork processor at about $520 million. Zhongpin had said its board would form a special committee to review the offer. Following the offer's announcement earlier this year, the Securities and Exchange Commission froze the assets of six Chinese citizens and one British Virgin Islands entity charged with insider trading in shares of Zhongpin. The SEC's complaint alleged the seven defendants reaped more than $9 million by trading in Zhongpin ahead of the announcement about Mr. Zhu's offer. On Monday, the company said its board had approved the merger, acting upon the unanimous recommendation of the special committee. The current deal is expected to close in the first quarter of next year. Golden Bridge intends to finance the merger through a combination of an equity commitment of $85 million by China Wealth Growth Fund I L.P. and a $320,000,000 term loan facility from China Development Bank Corp.'s Hong Kong Branch. Zhongpin, which specializes in pork and pork products, vegetables, and fruits, has a distribution network in China covering 20 provinces plus Beijing, Shanghai, Tianjin, and Chongqing and including 3,447 retail outlets as of the end of September. Zhongpin's export markets include Europe, Hong Kong, and other countries in Asia. Shares of Zhongpin came under pressure last year as it, like a handful of its Chinese counterparts, battled claims on financial blogs of alleged accounting missteps. Zhongpin has previously denied those allegations and stressed that the information contained in its filings with the SEC is accurate. Shares closed at $10.86 Friday and were inactive in recent premarket trading. The stock has climbed 27% so far this year.
