Impact of Cross-Border Acquisition on Consumer Willingness-to-Pay: The Case of Shuanghui-Smithfield Acquisition

Abstract

The $4.7 billion acquisition of Smithfield Foods, Inc. by China’s Shuanghui International Holdings Ltd. (now WH Group Ltd.) marks the largest Chinese takeover of a U.S. company in history. In this study, we explored how this acquisition affected consumers’ willingness-to-pay for meat products in China by conducting incentive compatible second price auctions, before and after the regulation approval of the acquisition. Our results suggest that Chinese consumers were willing to pay significantly more for US products than similar domestic products, plausibly due to food safety concerns. We found that the Shuanghui-Smithfield acquisition significantly increased Chinese consumers’ willingness-to-pay for Chinese products, but decreased their willingness to pay for US products.

Keywords: Cross-border acquisitions, Consumer Willingness-to-Pay, Product of USA, Meat products, Food safety, Experimental auctions

JEL Classification: D12, D44, G34, Q13