According to media sources, Starboard Value LP, one of the
largest shareholders of U.S. meat producer
Smithfield Foods, Inc.
) is now in favor of the company's proposed merger deal with
Hongkong-based Shuanghui International Holdings Limited.
Starboard, which has beneficial ownership of approximately 5.7%
in Smithfield, also stated that it will vote for the deal at a
special shareholders meeting to be held on Sep 24, 2013, as it
has failed to find an alternate buyer for the company.
Starboard had earlier planned to vote against the proposed
merger deal and tried hard to compel Smithfield to delay the
shareholder meeting. It sought other offers that would provide
greater value to Smithfield shareholders. A few weeks back,
Starboard sent a letter to Smithfield's board stating that it has
received written interest from other parties to buy Smithfield's
assets at a higher value.
Earlier, Starboard had also sent a letter to Smithfield's
board of directors in June stating that it will be in the best
interest of the shareholders if Smithfield divests its various
divisions like pork, hog production and international business
individually rather than divesting the whole business all at
once. Starboard also stated that the estimated value of the
company is $9 billion - $10.8 billion or $44 - $55 per share,
which is much higher than the deal price of $34 per share.
Per the deal signed on May 30, Shuanghui will acquire all of
the outstanding shares of Smithfield for $34.00 per share,
totaling $7.1 billion, including Smithfield's debt.
Smithfield was under pressure from another major shareholder,
Continental Grain, which urged the Smithfield board to break up
the company before the announcement of the Shuanghui deal. But
Continental sold its stake in June after it was satisfied with
the Chinese offer.
Most recently, two independent advisory firms Glass Lewis
& Co. and Institutional Shareholder Services also urged
Smithfield shareholders to vote in favor of the proposed deal. On
Sep 6, the Committee on Foreign Investment in the United States
(CFIUS) also approved the proposed merger deal after a 45-day
review period. Smithfield and Shuanghui also announced that the
parties have received governmental merger clearance in
The deal is expected to close by Sep 26 following shareholder
approval on Sep 24. If approved by shareholders, it will be the
largest ever Chinese takeover of a U.S. company.
The deal will open the doors for Smithfield to expand its
footprint in China taking advantage of Shuanghui's solid
distribution network. As far as Shuanghui is concerned, it will
be able to meet the growing demand for pork in its domestic
market by gaining control of Smithfield's brands such as
Smithfield, Armour and Farmland.
Smithfield holds a Zacks Rank #4 (Sell). Meat producers that
are better placed and are worth considering include
Pilgrim's Pride Corp
Tyson Food Inc
) which hold a Zacks Rank #2 (Buy). Another food company
Dole Food Co Inc
) with a Zacks Rank #2 is also worth considering.
DOLE FOOD CO (DOLE): Free Stock Analysis
PILGRIMS PRIDE (PPC): Free Stock Analysis
SMITHFIELD FOOD (SFD): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
To read this article on Zacks.com click here.