A lawsuit filed against Smithfield Foods by one of its shareholders is stalling the company’s $7.1-billion acquisition by China’s Shuanghui International.
David Payne filed the lawsuit in the United States District Court Eastern District of Virginia, claiming that Smithfield Foods executives neglected to give its shareholders all of the information about the merger—notably the value of the purchase price—thus violating the Securities Exchange Act of 1934.
Starboard Value, a New York-based hedge fund, publicly stated that Smithfield would be worth more if it were separated into three operating units—domestic pork production, hog farming and international meat sales—than if sold as a whole.
By breaking up Smithfield, Starboard values the company at $9 billion-$10.8 billion. Shares are currently offered to shareholders at $34 when, by Starboard’s estimate, it could be up to $44-$55 per share.
Smithfield wrote a letter to its shareholders in response to the lawsuit.
“The lawsuit is in its early stages and no significant developments have occurred,” the company said. “Smithfield believes the lawsuit is without merit and intends to vigorously defend against the complaint’s allegations.”
Many pork producers are opposed to Smithfield’s buyout. Earlier this month, a coalition of 17 farm, rural and consumer organizations delivered a letter urging the Obama administration to reject the acquisition. Read more here.