Starboard Organizing Alternative Offer For Smithfield Foods

Starboard Organizing Alternative Offer For Smithfield Foods
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Starboard Value LP, the activist hedge fund headed by Jeffrey Smith, released a new letter to its fellow shareholders of Smithfield Foods, Inc. (NYSE:SFD) indicating that it is working with a group of buyers to offer an alternative higher acquisition price for the largest pork processor and hog producer worldwide.

Starboard Organizing Alternative Offer For Smithfield Foods

Over the past two months, Moelis & Company and Business Development Asia (BDA), the financial advisors hired by Starboard Value, reached out to a number of parties to participate in a buyer group to acquire Smithfield Foods, Inc. (NYSE:SFD). According to the hedge fund, it received non-binding written interest from third parties to acquire the assets of the pork processor and hog producer at a price higher than the $34 per share offer by Shuanghui International Holdings Limited.

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“We are currently in the process of working with the indicated buyer 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,” wrote Starboard Value.

However, the activist hedge fund said it needs additional time to complete its effort in transforming the different non-binding interests to purchase the assets of Smithfield Foods, Inc. (NYSE:SFD) into a collective, alternative proposal to acquire the company as a whole.

The merger agreement between Smithfield and Shuanghui provides flexibility

Starboard Value emphasized that the merger agreement between Smithfield Foods, Inc. (NYSE:SFD) and Shuanghui provides flexibility and additional time for the hedge fund to complete its initiative to deliver an alternative superior  deal without jeopardizing the existing proposed merger.

Under the proposed merger agreement, the consummation date of the transaction is on November 29 of this year, which is two months later than the special meeting of shareholders on September 24. Starboard Value pointed out that the board of Smithfield Foods, Inc. (NYSE:SFD) is only allowed to consider alternative offers submitted prior to the approval of the proposed merger during the special meeting.

Approval and consummation of the merger agreement between Smithfield and Shuanghui

Starboard Value urged its fellow shareholders to vote against the proposed merger as their best action. According to the hedge fund, voting against it will not impair or prevent the eventual approval and consummation of the merger agreement between Smithfield Foods, Inc. (NYSE:SFD) and Shuanghui if it proves that it is the best deal for shareholders.

In addition, Shuanghi can only terminate the merger agreement unilaterally if is not completed by November 29 and if the shareholders reject it during the special meeting. Smithfield Foods, Inc. (NYSE:SFD) has the ability to unilaterally postpone the special meeting to allow enough time to solicit additional proxies if it does not receive sufficient votes to approve the merger agreement. However, the pork processor and hog producer has the responsibility to proceed with the special meeting as scheduled.

Starboard Value stressed that voting against the proposed merger at the special meeting will compel Smithfield Foods, Inc. (NYSE:SFD) to suspend it to be able to continue soliciting votes in favor of the merger agreement

“To be clear, this course of action would not give Shuanghui the ability to terminate the merger agreement since such right would only arise upon the conclusion of the special meeting without the proposed merger having received shareholder approval,” clarified Starboard Value.

According to the hedge fund, it will have enough time to submit an alternative and substantially higher proposal to the board of Smithfield Foods, Inc. (NYSE:SFD) is the special meeting will be postponed.


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