Hong Kong-based Shuanghui International, a majority shareholder of China’s largest meat-processing enterprise, has entered an agreement to acquire Smithfield for approximately $7.1 billion, including assumption of debt. If the deal is successful, Smithfield’s common stock will no longer be publicly traded, and the company will become a wholly owned independent subsidiary of Shuanghui. The deal is expected to close in the second half of 2013.
San Diego, Calif. law firm Johnson & Weaver, LLP said its investigation will determine whether the board breached their fiduciary duties to stockholders by failing to satisfactorily shop the company before entering into the agreement. Smithfield can entertain other offers. Sao Paulo, Brazil-based JBS S.A. and CP Group in Thailand are rumored to be in the mix.
“Shuanghui International’s offer appears to be inadequate and not in the best interest of Smithfield Foods shareholders,” said Jim Baker, lead analyst for Johnson & Weaver. He added that Smithfield Foods is trading at a low multiple relative to this year’s expected earnings.
In an information request form, New York law firm Levi & Korsinsky said its investigation will include “possible breaches of fiduciary duty and other violations of state law” in connection with the deal.
“The investigation concerns whether the Smithfield Board of Directors breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into the transaction, and whether Shuanghui International Holdings Ltd. is underpaying for Smithfield, thus unlawfully harming Smithfield shareholders. In particular, at least one analyst set a price target for Smithfield stock at $48.00 per share.”
