Starboard Value LP, an activist hedge fund managed by Jeffrey Smith engaged the services of financial advisers to seek alternative opportunities or transactions for Smithfield Foods, Inc (NYSE:SFD).
Starboard Value tries to block Smithfield Foods, Inc (NYSE:SFD) sale
Based on a regulatory filing with the Securities and Exchange Commission (SEC), Starboard Value LP hired financial advisors, Moelis & Company and BDA Advisors Inc to help in “identifying and connecting any strategic or financial buyers” for the individual business units of Smithfield Foods, Inc (NYSE:SFD). The hedge fund wants to find a “sum-of-the-parts transaction that could qualify as superior agreement.”
Smithfield Foods, Inc (NYSE:SFD) is the largest pork processor and hog producer worldwide. In May, the company inked a merger agreement with Shuanghui International Holdings Limited, the largest pork producer in China.
Under the agreement, the Chinese company agreed to acquire the shares of Smithfield Foods, Inc (NYSE:SFD) for $34 per share or $4.72 billion subject to regulatory and shareholders’ approvals as well as foreign merger clearance and review by the Committee on Foreign Investment of the United States (CFIUS).
Starboard Value is the largest shareholder of Smithfield Foods, Inc (NYSE:SFD) with 5.7% stake in the company. The hedge fund recently urged the company to abandon its agreement with Shuanghui International because it is worth more that $34 per share proposal of the Chinese pork processor.
The hedge fund explained to the board of directors of Smithfield Foods, Inc (NYSE:SFD) that the company is more valuable if it would break up its business operations into three divisions- hog farming, U.S. pork production, and international sales of fresh and packaged meats then subsequently sell each unit. Starboard Value is confident that there are parties interested to acquire each business unit.
Last Friday, Smithfield Foods, Inc (NYSE:SFD) announced that the required waiting period related to its merger agreement with Shuanghui International under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired.
In addition, the company revealed that the antitrust or anti-competitive authorities of Mexico and Poland approved the transaction.
Smithfield Foods, Inc (NYSE:SFD) Compromise Scenario
Meanwhile, Ken Goldman, analyst at JP Morgan Equity Research of America believed that the CFIUS will be able to find a compromise solution to approve the transaction. The analyst opined that pork is not a direct issue to the national security of the United States, but the agency may have a heightened concern because China has a negative reputation in the protein industry due to the recent bird flu outbreak and thousands of dead hogs found in rivers.