--Starboard reports interest from buyers seeking parts of
Smithfield Foods
--Starboard says interest suggests a higher value for Smithfield
than Shuanghui deal
--Starboard plans to vote against Shuanghui's $4.7 billion
deal
An activist shareholder seeking to break up Smithfield Foods
Inc. (SFD) said it has received indications of interest from
possible buyers that imply a value for the pork producer
"substantially" above the purchase price already agreed to with
China's Shuanghui International Holdings Ltd.
The holder, Starboard Value LP, also said in its Tuesday letter
to Smithfield shareholders that it plans to vote against the deal
with Shuanghui, which agreed in May to buy Smithfield for $34 a
share, or $4.7 billion, in what would be the biggest Chinese
takeover of a U.S. company if it is completed. Starboard holds a
5.7% stake in Smithfield.
A representative of Smithfield didn't immediately respond to a
request for comment.
Starboard is working with possible buyers to construct an
alternative all-cash proposal from a single entity for the
acquisition of Smithfield that could be considered superior to the
one with Shuanghui.
The hedge fund revealed its stake in Smithfield in June and
argued then that the company, based in the Virginia town of the
same name, 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.
Tuesday, Starboard said it had received written indications of
interest from third parties for each of Smithfield's assets, which
in total imply a value for Smithfield at a price substantially
above the $34 a share deal with Shuanghui.
Starboard also said it will vote against the proposed Shuanghui
merger in a bid to try to force Smithfield to postpone the upcoming
special meeting slated for Sept. 24. The company's board is only
allowed to consider alternative acquisition proposals received
before shareholder approval of the proposed merger and Starboard is
aiming to buy more time to find a different buyer.
Under the terms of the Shuanghui deal, Smithfield is allowed to
delay the meeting if it hasn't received enough votes to approve the
proposed merger. Nov. 29 is the last date by which the merger with
Shuanghui must be closed, according to the terms of the deal.
In its letter, Starboard noted that it believes Smithfield's
board failed to run a full and fair process to sell the company to
ensure that shareholders realized the highest possible price.
"It is our belief that the proposed merger undervalues
Smithfield and that with more time an alternative proposal to the
board at a superior price for shareholders could be available,"
Starboard said.
The hedge fund noted that, while it currently intends to vote
against the proposed merger, if a superior acquisition proposal
fails to materialize, it will later vote in favor of the
merger.
In July, The Wall Street Journal reported that Starboard had
hired merger-advisory firms Moelis & Co. and Business
Development Asia, or BDA, to help with its effort to get a better
deal for Smithfield shareholders. The paper had reported that the
firms will be tasked with trying to find buyers for the pieces of
the company.
Smithfield stock has risen 55% so far this year and gained 24
cents Tuesday to $33.78.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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