Smithfield Investor Says No to Shuanghui Deal

Hedge fund Starboard Value LP, one of Smithfield Foods Inc.’s biggest shareholders, said it has lined up investors willing to pay more than the price offered by China’s Shuanghui International Holdings Ltd. to acquire the U.S. pork producer.

The May deal valued Smithfield at $4.7 billion excluding debt, or $34 per share. It would become the biggest Chinese takeover of an American company.

In a letter on Sept. 3 to Smithfield shareholders, New York-based Starboard said that it plans to vote against the deal struck between Smithfield and Shuanghui in May. Instead, it had received “nonbinding written indications of interest” from other parties willing to pay more than the $34 per share offered by Shuanghui. However, no counter proposals had been completed as of this week.

“Based on these indications of interest, we are currently in the process of working with the indicated buyers to construct an alternative all-cash proposal from a single entity for the acquisition of Smithfield that, we believe, could be deemed by the Board to be reasonably likely to lead to a superior proposal under the terms of the Merger Agreement with Shuanghui,” Starboard wrote in its letter to investors, according to CNBC.

Starboard holds around 5.7 percent of Smithfield’s shares and is one of its biggest single shareholders. Smithfield scheduled a special shareholders meeting on Sept. 24 to vote on the acquisition by Shuanghui.

Starboard was critical of the Shuanghui deal from the get-go. In May, it sent a letter to Smithfield board arguing that shareholders would receive greater value if the company had split itself and sold off its businesses individually.

Smithfield runs and outsources farms across the nation, and markets pork products under the brands of Armour, Cook’s, Smithfield’s and Farmland.

The company’s centralized operation is able to keep the U.S. hog supply steady and its pork products relatively void of defects.

But these circumstances could change drastically under the control of a Chinese owner. Shuanghui has been mired in food safety controversy in China. In March 2011, the company sold meat tainted by illegal additives, which made hogs leaner but were harmful to humans.

Frank Yu is a contributor to the Epoch Times.