Starboard Hedge Fund Changes Position, Will Now Back Smithfield-Shuanghui Deal

Smithfield Foods


Starboard Value LP, the hedge fund which had fought against Shuanghui International Holdings Ltd’s $4.7 billion buyout of Smithfield Foods Inc., changed course and said it will now vote for the two companies to become one after failing to come up with an alternative vote.

Starboard, in a letter to Smithfield Shareholders earlier in the month, said it planned to vote against the deal with Shuanghui, which agreed in May to buy Smithfield for $34 a share, in what would be the biggest Chinese takeover of a U.S. company.  Starboard holds a 5.7% stake in Smithfield.

Starboard said it was working with possible buyers to construct an all-cash proposal from a single entity for the acquisition of Smithfield that could be considered superior to Shuanghui’s bid.

Reuters reports that in a Securities and Exchange Commission filing on Friday, Starboard said that due to a number of issues, including the challenges of coming up with a formal counter offer by a September 24 special meeting, it plans to vote in favor of the deal, “unless another proposal emerges.”

It added that while it’s confident Smithfield could have received a higher price, Starboard wasn’t able to come up with an alternative for shareholders as of now.

The company’s board is allowed to consider alternative bids if they are received before shareholder approval of the proposed merger.  Also, under the terms of the Shuanghui deal, Smithfield is allowed to delay the meeting if it hasn’t received enough votes to approve the proposed merger.  The agreement also includes a November 29 deadline to close the deal.