Smithfield Food Urged to Split Up, Not Sell

by Christopher Freeburn | June 17, 2013 10:35 am

smithfield Smithfield Food Urged to Split Up, Not Sell[1]A Chinese company’s plans to acquire Smithfield Foods (SFD[2]) may have hit a snag[3].

Shuanghui International Holdings announced last month that it would buy Smithfield for $4.72 billion, the largest purchase of an American firm by a Chinese company. However, one of Smithfield’s largest shareholders, Starboard Value, says the deal undervalues the Virginia-based pork producer, the Associated Press notes.

On Monday, Starboard submitted a letter to Smithfield’s board, contending the company is actually worth between $9 billion and $10.8 billion. Starboard argues that the board could better reward shareholders by breaking the company up and selling its assets. While Starboard stopped short of opposing the Chinese acquisition outright, it did say that it would seek to identify potential buyers for Smithfield units.

Smithfield had been previously under pressure to split up[4] from privately-held Continental Grain Company. Smithfield saw its income tumble 63% during its fiscal fourth quarter due to rising commodities costs and falling exports.

Starboard holds a 5.7% stake in Smithfield.

Earlier this month, the Securities and Exchange Commission announced that it had frozen the assets of a man in Thailand who made $3.2 million trading in Smithfield futures in the weeks just prior to the announcement of the Chinese buyout[5].

Shares of Smithfield rose almost 1% in Monday morning trading.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/02/smithfield.jpg
  2. SFD: http://studio-5.financialcontent.com/investplace/quote?Symbol=SFD
  3. may have hit a snag: http://hosted.ap.org/dynamic/stories/U/US_SMITHFIELD_FOODS_STARBOARD?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2013-06-17-07-39-00
  4. had been previously under pressure to split up: http://investorplace.com/2013/03/smithfield-foods-under-pressure-to-split-into-three/
  5. in the weeks just prior to the announcement of the Chinese buyout: http://investorplace.com/2013/06/thailand-man-made-3-2m-on-smithfield-food-trades/

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