Smithfield Investor Continental Grain Supports China Deal

Continental Grain Co., the Smithfield Foods Inc. (SFD) investor that called for a breakup of the pork supplier, said it supports the $4.7 billion takeover offer from Shuanghui International Holdings Ltd.

Continental will exit its shareholding following the bid, the closely held-company said yesterday in a statement. Continental Grain has a 5.8 percent stake in Smithfield, making it the largest investor after BlackRock Inc., according to data compiled by Bloomberg.

Smithfield, the world’s largest hog producer, should be split into three businesses after its shares lagged behind those of competitors including Hormel Foods Corp. (HRL) and Tyson Foods Inc., Continental Grain said in a March 7 letter. The investor said April 25 a breakup of the Smithfield, Virginia-based company would achieve a stock price of $40 within three years. Smithfield last week agreed to a $34-a-share takeover offer from Shuanghui.

“We have been advocating for value creation and are pleased that the Smithfield board of directors and management are being proactive in realizing value for the benefit of all of its shareholders,” Continental Chief Executive Officer Paul J. Fribourg said in the statement.

Fribourg resigned from Smithfield’s board in 2009 after he disagreed with a $250 million share sale by the company.

‘Too Expensive’

Buying Smithfield would give Hong Kong-based Shuanghui, China’s top pork producer, access to more advanced production technology as well as 460 farms that raise about 15.8 million hogs a year. The deal, valued at about $7.1 billion including debt, would be the largest for a meat producer and China’s biggest takeover of a U.S. company, according to data compiled by Bloomberg.

The U.S. producer had 30 days to continue talks with possible buyers Charoen Pokphand Foods Pcl and JBS SA, according to a person familiar with the matter said last week.

JBS, the third-largest U.S. hog producer, didn’t bid for Smithfield because the price was too high, CEO Wesley Batista said yesterday.

“Smithfield was interesting, but too expensive and it didn’t made sense price-wise,” Batista said in an interview at an event in Sao Paulo. “Hypothetically, we would be willing to pay much less than the Chinese offered,” he said, declining to elaborate.

Shuanghui International is a holding company that counts among its shareholders CDH Investments Fund Management Co., Goldman Sachs Group Inc., New Horizon Capital, Kerry Group and Temasek Holdings Pte., as well as Shuanghui employees and management, according to its website.

Other Owners

The management, headed by Chairman Wan Long, has 36.23 percent of the shares of Shuanghui International, CDH has 33.7 percent and Goldman Sachs holds 5.18 percent, according to a document filed in November 2011 to the Shenzhen Stock Exchange by Citic Securities Co., which was hired to advise on a restructuring.

Management’s shares have twice the voting rights, giving it overall control of Shuanghui International, according to the document. An e-mailed request to Shuanghui International for an updated shareholder list hasn’t been answered.

Shuanghui Group, a unit of Shuanghui International, has been known as Shineway Industry Group Co., and some of its pork ribs are sold under the Shineway brand, according to the website of Shuanghui Group.

Smithfield rose 0.1 percent to $32.98 yesterday in New York. Henan Shuanghui Investment & Development Co., Shuanghui’s listed unit, climbed 0.8 percent to 41.43 yuan at 2 p.m. in Shenzhen.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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