Starboard Changes Position on Smithfield Deal

Activist hedge fund Starboard Value LP, which has fought against Shuanghui International Holdings Ltd.'s $4.7 billion buyout of Smithfield Foods Inc. (SFD), changed course and said it will now vote for the tie-up after failing to come up with an alternative bid.

In a letter to Smithfield shareholders earlier this month, Starboard 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 had 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.

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

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

A representative from Smithfield wasn't immediately available for comment.

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 Nov. 29 deadline to close the deal.

Proxy advisory firms Glass Lewis & Co. and Institutional Shareholder Services have recommended that shareholders back the deal.

Smithfield shares were down 20 cents at $33.97, below the offer price.

Write to Ben Fox Rubin at [e-mail]

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