Source:  MEATINGPLACE.COM, 3/11/11

Weakness in shares of Smithfield Foods following the company’s very strong third-quarter earnings report on Thursday suggests investors are worried about the potential for a Chinese investor to divest a large block of Smithfield stock, an analyst says.

Stephens Inc. analyst Farha Aslam, in a note to clients, said she thinks investors are concerned that 7 million to 8 million shares held by the semi-government Chinese trading company COFCO may be sold, following the resignation from Smithfield’s board earlier this week of the group’s chairman, Ning Gaoning.
Noting COFCO invested in Smithfield in June 2008 with the aim of developing a strategic trading relationship, Aslam said, “It is difficult to predict the timing of a COFCO divestiture, but the fundamentals of the business remains excellent.”

Smithfield Chief Executive C. Larry Pope addressed the resignation on Smithfield’s earnings conference call, saying that the COFCO chairman struggled to make the board meetings given the distance he had to travel and that Smithfield and COFCO had differing goals for the relationship.

The two companies remain on good terms, Pope emphasized. “I am not sure what he’ll do with his shares. They may hold them; they may sell them. I think they may likely sell them at some point. They are not in any rush. They have got a nice profit in it,” Pope told analysts.

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