June 25, 2013 (Shareholders Foundation) - An investor, who currently holds NYSE:SFD shares, filed a lawsuit against directors of Smithfield Foods, Inc. in effort to stop the proposed takeover of Smithfield Foods, Inc. by Shuanghui International Holdings Limited for $34.00 per NYSE:SFD share.
The plaintiff claims that the defendants breached their fiduciary duties owed to NYSE:SFD stockholders by agreeing to sell the company too cheaply via an unfair process.
On May 29, 2013, Smithfield Foods, Inc. and Shuanghui International Holdings Limited announced that they have entered into a merger agreement that values Smithfield Foods, Inc at approximately US$7.1 billion, including the assumption of Smithfield's net debt. Under the terms of the agreement Shuanghui International Holdings Limited will acquire all of the outstanding shares of Smithfield Foods, Inc. for US$34.00 per share in cash.
However, the plaintiff alleges that $48-offer is too low and undervalues the company. Indeed, at least one analyst has set the high target price for NYSE:SFD shares at $48.00 per share. Furthermore, the financial performance of Smithfield Foods, Inc. improved lately. For instance, Smithfield Foods, Inc. reported that its Total Revenue rose from over $11.2 billion for the 52 weeks period that ended on May 2, 2010 to over $13.09 billion for the 52 weeks period that ended on April 29, 2012 and that its Net Loss of $101.40 million for the 52 weeks period that ended on May 2, 2010 turned into a Net Income of $361.30 million for the 52 weeks period that ended on April 29, 2012. In addition, shares of Smithfield Foods, Inc. grew from $5.93 per share in March 2009 to as high as $26.85 per share in March 2013.
The plaintiff also says that shareholders were denied critical information about the transaction. For instance, complaint cites an estimate from another investor placing the value of Smithfield Foods, Inc. at anywhere from $9 billion to $10.8 billion.
The plaintiff seeks to halt the proposed takeover under the current conditions.
On June 24, 2013, NYSE:SFD shares closed at $32.81 per share.