Smithfield Foods Inc. (SFD) said it will review a letter from a
major investor that is pressuring the pork producer to explore a
breakup instead of following through with its planned takeover by
Shuanghui International Holdings Ltd., but said it continues to
believe the proposed merger is in the best interests of the company
and its shareholders.
Activist investment fund Starboard Value LP said in the letter,
which was sent to Starboard's board Monday, that it had taken a
5.7% stake in the world's largest hog farmer and pork processor and
urged the company to consider splitting up.
Virginia-based Smithfield agreed last month to a $4.7 billion
offer from Shuanghui International Holdings Ltd. in a deal that
would mark the biggest Chinese takeover of a U.S. company.
In the letter, Starboard argued that Smithfield would be worth
more if it were broken up into three parts--U.S. pork production,
hog farming and international sales of fresh and packaged
meats--and then sold.
In response, Smithfield reaffirmed its recommendation that its
shareholders approve the Shuangui merger. Smithfield said the
combination with Shuanghui provides Smithfield shareholders with
"significant, immediate and certain" cash value for their
investment. It said the company's board considered several
different separation scenarios and is pleased with the outcome of
the process it followed leading to the planned Shuanghui
merger.
Smithfield is the latest high-profile battle for Starboard since
the fund was spun off from the Cowen Group in 2011. Starboard
challenged AOL Inc. with a proxy but lost its attempt to elect
directors when shareholders opted to stick with management's
team.
Shares of Smithfield closed at $33.08 and were unchanged after
hours. The stock is up 72% over the past 12 months.
-- Sharon Terlep contributed to this story.
Write to Debbie Cai at debbie.cai@dowjones.com
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