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Shareholder alleges withholding of financials in suit against Smithfield
Story Date: 7/30/2013
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Source: Michael Fielding, MEATINGPLACE, 7/29/13
A Smithfield Foods shareholder has filed a putative class action against the company, seeking an injunction and related legal costs, in the latest move to halt the proposed $7.1-billion (including debt) acquisition by Shuanghui International.
The lawsuit, filed by David Payne in the United States District Court Eastern District of Virginia on June 21, alleges that Smithfield executives and directors violated the Securities Exchange Act of 1934 by denying them information about the proposed merger – particularly the value of the purchase price.
Another investor, New York-based hedge fund Starboard Value LP, informed the Securities and Exchange Commission earlier this month that it has hired Moelis & Company and BDA Advisors Inc. to find what it describes as a “sum-of-the-parts” deal that could be worth more value to Smithfield Foods shareholders.
According to Payne’s complaint, Starboard Value has valued the company at $9 billion-$10.8 billion, or $44-$55 per share – much higher than the $34 per share offered to shareholders.
Starboard Value owns a 5.7-percent stake in Smithfield and has publicly expressed its opinion that the company would be more valuable if broken up into three operating units – domestic pork production, hog farming and international meat sales – that would be sold individually.
“The lawsuit is in its early stages and no significant developments have occurred,” Smithfield Foods said in a letter to its shareholders that was filed with the Security and Exchange Commission July 26. “Smithfield believes the lawsuit is without merit and intends to vigorously defend against the complaint’s allegations.”
The suit also alleges that the seven- and eight-figure compensation packages offered to four Smithfield executives may produce a conflict of interested in the event that a rival bidder makes an offer.
Shuangui's wholly owned U.S. subsidiary Sun Merger Sub Inc. is also named in the suit.
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