Smithfield Foods-Starboard Value Situation Takes a New Turn

Smithfield Foods Starboard Value: Smithfield Foods, Inc. (NYSE:SFD), which is currently in the process of merger with China-based Shuanghui International Holdings Limited, is today one of the stocks in the middle of the market’s attention, mainly because of a recent move made by activist “hedgie” Jeffrey Smith, the manager of Starboard Value. Starboard, which currently owns 5.7% of Smithfield Foods, in a 13D filing with the SEC disclosed that Starboard will vote in favor of the merger.

Jeff Smith

This turn of events is interesting, since Smith was struggling against the idea of the proposed merger between Smithfield Foods and Shuanghui International Holdings, which offered a price of $34 per share. At the recent Value Investing Congress, held at the beginning of the week in New York, Smith did not mention anything about his position regarding Smithfield Foods, and just presented his case on Wausau Paper Corp. (NYSE:WPP).  However, after failing to find another proposition for Smithfield’s shareholders that would be better than the offered $34 per share, Smith decided to change his mind. Amid this news, the stock of Smithfield Foods lost around 0.6% to $33.97 in morning trading.

“In light of (i) the restrictions imposed by the merger agreement between the Issuer [Smithfield Foods] and Shuanghui, and (ii) the requirement of structuring a cash bid from a single entity, it proved challenging for the bidder group to formalize and deliver an alternative proposal prior to the special meeting scheduled for September 24, 2013 at which time shareholders will vote on the Proposed Merger.  While we are confident that the Issuer could have received value in excess of that available pursuant to the Proposed Merger, we are not able to offer shareholders an alternative proposal at this time.  Therefore, at this time, unless another proposal emerges, we plan on voting in favor of the Proposed Merger,” Starboard said in the filing with the SEC.

Smithfield and  Shuanghui International Holdings agreed on a merger earlier in May 2013. The merger that prices Smithfield at around $7.1 billion, is considered one of the largest takeovers of a U.S.-based company, made by a Chinese company. In addition to Starboard that owns around 7.96 million shares, including 6.08 million shares under “Call” options, some other hedge funds bullish on Smithfield Foods are: John Paulson’s Paulson & Co, Robert Emil Zoellner’s Alpine Associates, and Levin Capital Strategies, managed by John A. Levin. Check back for more updates on the Smithfield Foods Starboard Value situation.

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Disclosure: none