Lawsuit challenges Smithfield buyout
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SMITHFIELD, Va. – A Smithfield shareholder filed a lawsuit in June alleging the company denied shareholders crucial information about the buyout deal with Shuanghui Holdings International. The lawsuit also claims the purchase price undervalues the company.
David Payne filed the putative class action lawsuit in the US District Court Eastern District of Virginia. He is alleging breach of fiduciary duties to Smithfield shareholders and names directors and officers of the Smithfield, Va.-based company in the lawsuit. Payne is seeking an injunction to prevent completion of the deal in addition to attorneys' and experts' fees.
"The lawsuit is in its early stages and no significant developments have occurred," the company said in its proxy statement filed with the Securities and Exchange Commission. "Smithfield believes the lawsuit is without merit and intends to vigorously defend against the complaint’s allegations."
Hong Kong-based Shuanghui, a majority shareholder of China’s largest meat-processing enterprise, proposed acquiring Smithfield for approximately $7.1 billion, including assumption of debt. Under the terms of the agreement, Shuanghui will acquire all of Smithfield’s outstanding shares for $34 per share in cash, which is a 31 percent premium to Smithfield’s closing stock price of $25.97 on May 28. The deal is expected to close in the second half of 2013.
Several law firms launched investigations into Smithfield's board of directors to determine whether the board breached its fiduciary duties to stockholders by failing to shop the company before entering into the agreement. Additionally, Starboard Value GP announced it hired Moelis & Company and BDA Advisors Inc. to determine if breaking up Smithfield will net shareholders more than the $34 per share stipulated under the current proposed agreement.