Smithfield urged to consider break-up
Investor says break-up value of pork producer would be worth more than Shuanghui's offer
Smithfield Foods, the pig producer that has agreed to a US$4.7 billion bid from Shuanghui International, was urged by activist investor Starboard Value to consider splitting itself up instead.
A break-up may value the world's largest pork producer at about US$44 to US$55 a share, the investor, which said it holds a 5.7 per cent stake in the company, wrote in a letter to Smithfield's board. Hong Kong-based Shuanghui agreed in May to pay US$34 a share for the 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 Jeffrey Smith said in the letter.
Smithfield said in a statement that it will review the letter and reiterated its recommendation that shareholders accept Shuanghui's offer. The Chinese company's offer is good for Smithfield shareholders, investors and employees, said a spokesman for Shuanghui.
Asked if Shuanghui would consider raising the offer price, a spokesman told the that the company would not comment at this stage.
The US producer faced similar demands in March from shareholder Continental Grain as rising animal-feed costs made pig production unprofitable. Continental said in April that a break-up into three businesses would achieve a stock price of US$40 within three years. It subsequently backed the bid from Shuanghui and said it would exit its holding after the deal.
