Starboard Value LP is in advanced talks with private equity firms and meat processors about acquiring Smithfield Foods Inc. (NYSE:SFD). China’s Shuanghui International Holdings Ltd. announced in May it will acquire Smithfield Foods Inc. for $7.1 billion including debt assumption. Starboard Value plans to form a rival bidding group to snatch the Smithfield Foods Inc. deal from the Chinese firm, people familiar with the matter told Shruti Date Singh and Beth Jinks of Bloomberg.
Starboard says breakup could boost value
Sources said on condition of anonymity that the Starboard-led group will buy Smithfield Foods Inc. (NYSE:SFD) and then break up the meat processor. The investment firm believes that breaking up Smithfield Foods Inc. (NYSE:SFD) could yield better value. According to a July 12 SEC filing, Starboard Value LP holds a 5.7% stake in the Smithfield, Virginia-based company.
Jeffrey Smith-led Starboard has approached buyout firms including KKR & Co. LP (NYSE:KKR) and the Blackstone Group LP (NYSE:BX). Tyson Foods Inc. (NYSE:TSN) was the meat processor approached by the investment firm, the sources said. However, they haven’t formed a consortium yet. One of the people said that Starboard could make a former offer for Smithfield Foods Inc. (NYSE:SFD) within a month.
Starboard and politicians put pressure on Smithfield Foods Inc. (NYSE:SFD)
Hong Kong-based Shuanghui International Holdings Ltd. has agreed to pay Smithfield Foods Inc. (NYSE:SFD) shareholders $34 per share. Starboard estimates that a break up of Smithfield Foods Inc. (NYSE:SFD) could fetch $44 to $55 per share. The Chinese firm’s proposal is under review by regulators, who are extra cautious about a Chinese firm buying a U.S. company. The initial 30-day review of the proposal is over. But the Senate has asked the Committee on Foreign Investment in the U.S. to conduct another 45-day review of the offer. Politicians and Starboard have also bashed Smithfield Foods Inc. (NYSE:SFD)’s CEO over making a deal with a Chinese company.
Last month, Smithfield Foods Inc. (NYSE:SFD) said in an SEC filing that the company board has evaluated a breakup through spinoffs or carve-outs. But these alternatives are not in the best interest of the company and its shareholders. That’s because Smithfield Foods Inc. (NYSE:SFD)’s hog production business offers synergies and efficiencies.
Smithfield Foods Inc. (NYSE:SFD) shares were down 0.30% to $33.55 at 11:20 AM EDT.