Starboard Says Smithfield Has Drawn Third Party Interest

Starboard Value LP, the activist investor that’s advocating a breakup of Smithfield Foods Inc., said it received interest from third parties that may want to buy the individual assets of the world’s largest pork supplier.

The investment firm is working with the parties, which it didn’t identify, to form an alternative to a $34-a-share takeover offer from China’s Shuanghui International Holdings Ltd., Starboard said yesterday in a filing.

Starboard holds a 5.7 percent stake in the Smithfield, Virginia-based meat processor and said it will vote the shares against Shuanghui’s $4.7 billion bid at a Sept. 24 shareholder meeting. The investor also said it’s trying to compel Smithfield to delay the meeting because, under the terms of the Shuanghui merger agreement, Smithfield’s board can’t consider alternative bids after the Chinese deal is approved by shareholders.

Starboard, which has pushed for changes at retailer Office Depot Inc. and Internet company AOL Inc. in the past two years, has approached potential financial investors in Smithfield such as private-equity firms KKR & Co. and Blackstone Group LP, a person familiar with the process said Aug. 8.

Shuanghui agreed to acquire Smithfield in May in what would be the largest Chinese purchase of a U.S. company. The transaction is subject to a review from the Commission of Foreign Investment in the U.S.

Hog ‘Synergies’

Another shareholder that lobbied Smithfield to consider a breakup, Continental Grain Co., said in June it was satisfied with Shuanghui’s bid.

Smithfield said in a July filing that its board evaluated breaking up the company and concluded that it wasn’t “in the best interests of Smithfield and its shareholders because, among other things, Smithfield’s hog production segment created efficiencies and synergies.”

A spokeswoman for the company didn’t respond to a request for comment about yesterday’s Starboard filing.

Smithfield rose 0.4 percent to $33.68 in New York yesterday. The shares have climbed 56 percent this year.

Shuanghui has arranged about $4 billion of financing from a group of eight banks for the proposed takeover, the Hong Kong-based company said yesterday in a statement. The lenders are Bank of China Ltd., Rabobank Group, Credit Agricole SA, DBS Bank Ltd., Natixis, Royal Bank of Scotland Plc, Standard Chartered Plc and Industrial & Commercial Bank of China Ltd.

Moelis & Co. and BDA Advisors Inc. are advising Starboard. Barclays Plc is Smithfield’s financial adviser and Simpson Thacher & Bartlett LLP and McGuireWoods LLP are its legal counsel on the deal. Morgan Stanley is the financial adviser for Shuanghui and Paul Hastings LLP and Troutman Sanders LLP are serving as the company’s legal counsel.

Before it's here, it's on the Bloomberg Terminal.