Smithfield Foods Inc., which has agreed to a $4.7 billion bid from Shuanghui International Holdings Ltd., was urged by activist investor Starboard Value LP to consider splitting itself up instead. Bloomberg News reports that a breakup may value the world’s largest hog and pork producer at about $44 to $55 a share, the investor, which said it holds a 5.7 percent stake in the company, wrote in a letter to Smithfield’s board. Hong Kong-based Shuanghui agreed in May to pay $34 a share for the Smithfield, Virginia-based company.
“We question whether the board gave sufficient consideration to a sale of the divisions in separate transactions, or whether it focused primarily on an all-cash transaction for the company as a whole,” Starboard Chief Executive Officer Jeffrey C. Smith said in the letter.
Shuanghui Chairman Wan Long said May 31 the company may raise its offer to meet other bids if necessary. The transaction by China’s top pork producer is valued at about $7.1 billion including debt.
“Raising the offer for Smithfield would have to prolong the time for Shuanghui to recover costs,” James Feng, general manager at Soozhu.com, China’s biggest independent hog researcher, said today. “A higher valuation of Smithfield may force Shuanghui to walk away.”
Smithfield, which reiterated its recommendation that shareholders accept Snuanghui’s offer, said it would review the Starboard letter.
Source: Bloomberg News