Source: Chris Scott, MEATINGPLACE, 9/9/13


Two protein industry analysts remained neutral on the proposed $34-a-share deal between Smithfield Foods Inc. Shaunghui International Holdings of China, believing that the deal will close at the specified price.

But Ken Goldman of J.P. Morgan raised his estimate for Smithfield’s fiscal 2014 earnings to $2.70 from $2.39 in the wake of last week’s earnings report and the deal’s clearance by U.S. regulators. Goldman adds that because dissident shareholder Starboard Value L.P. has yet to deliver a counter-offer, he believes that the most likely “end game” is for the Shaunghui deal to go through.

Kenneth Zaslow of BMO Capital Markets predicts that the Shaunghui deal is on track to close in the second half of calendar 2013.

He warns, however, that the probability of a higher bid ultimately being offered could increase as Starboard moves forward with its plans – along with a recent sharp drop in corn prices. Both factors make Smithfield a more attractive target, he says. He also calls Shaunghui’s $34-a-share offer price “acceptable” but not a maximum given Smithfield’s earnings power.

Unlike Goldman, Zaslow did not adjust any upcoming earnings estimates for Smithfield.

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