US investor planning rival Smithfield bid
According to a report from Bloomberg News, insiders have revealed that Starboard, which owns a 5.7% stake in Smithfield, is hoping to form a bidding group to challenge Shuanghui's takeover of Smithfield.
The report stated that Starboard had approached buyout firms and meat processors including Tyson Foods, and could send a proposal to Smithfield’s board by the end of the month. It added that if the bid was successful, the group would break up the US processor.
However, experts pointed out that it would be hard to derail Shuanghui’s takeover at this stage, and that Smithfield’s board had already considered breaking up the company, concluding that it would not be in the best interest of the business and its shareholders.
Michael Cook, CEO of SouthernSun Asset Management LLC in Memphis, told Bloomberg that the rival bid would have to offer “really good” economics to be successful.
Smithfield announced in May that its board had agreed to sell outstanding shares to Shuanghui International Holdings, making Smithfield a wholly-owned independent subsidiary of the Chinese meat processor.
The deal is currently under review by the Committee on Foreign Investment in the United States (CFIUS), which is considering whether the takeover would pose any national security concerns.
Some US politicians have raised concerns that the Chinese takeover of a major US food producer could have implications for food security.
In June, fifteen out of 20 members of the US Senate Agriculture Committee wrote to Treasury Secretary Jacob Lew urging him to include the US Department of Agriculture and Food and Drug Administration in the review, warning that issues of food security, food safety and biosecurity should be considered for any foreign takeovers of US food companies.
“The United States has the safest, most efficient and reliable food supply in the world. It is one of our nation’s great strengths, and we must ensure that it is preserved and protected,” the letter said.
Concerns have also been raised over the effect the deal might have on US supplies of crude herapin, which is derived from pig intestines and used in the manufacture of blood-thinning drugs.