ISS Recommends Smithfield Give Nod to Shuanghui Deal

A major proxy advisory firm has recommended shareholders of Smithfield Foods Inc. (SFD) vote in favor of the company's pending $4.7 billion acquisition by Shuanghui International Holdings Ltd. at an upcoming meeting scheduled for Sept 24.

The recommendation from Institutional Shareholder Services comes after Smithfield investor Starboard Value said last week that it plans to vote against the deal with Shuanghui--which agreed in May to buy Smithfield for $34 a share--as it continues to seek alternative bidders for Smithfield's assets. The hedge fund holds a 5.7% stake in Smithfield.

On Thursday, ISS said the $34 per-share value provides shareholders with a "considerable and certain premium to the company's standalone trading price." The advisory firm also noted the certainty of the deal's closure has "improved considerably" over the past several months as Shuanghui secured its committed financing and the acquisition has received the necessary regulatory approvals.

Last week, the Committee on Foreign Investment in the U.S. approved the purchase of Smithfield by Shuanghui, the last major obstacle in what is expected to be the biggest purchase of a U.S. company ever by a Chinese firm.

In a statement, Smithfield Chief Executive C. Larry Pope said he is "pleased" that the pending deal has been endorsed by ISS. Meanwhile, a representative of Starboard didn't immediately respond to a request for comment.

Smithfield's pork exports have fallen because of a weakening yen that has dampened demand from Japan, as well as tighter rules in China and Russia designed to block imports of pork raised using ractopamine. The medicated feed additive, used to produce lean muscle in hogs instead of fat, is permitted and widely used in the U.S. but is banned in much of the rest of the world.

Earlier this month, Smithfield reported its fiscal first-quarter earnings tumbled 36% as the pork processor was again hit by declining pork exports, while hog production raising costs increased.

Shares closed Wednesday at $34.17 and were inactive premarket. The stock has risen 4.3% in the past three months.

Write to Saabira Chaudhuri at [e-mail]

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