Smithfield shareholder approves merger

US hedge fund Starboard Value LP, a major shareholder of US pork processor Smithfield Foods, announced it will approve a bid by Shuanghui International Holdings Ltd (Shuanghui) to buy Smithfield, according to a Starboard Value filing on the US Securities and Exchange Commission on Friday.

Starboard believes Smithfield deserves a higher price but since it could not attract any other proposals, it will agree to the deal, Starboard said in the filling.

Starboard holds a 5.7 percent stake in Smithfield. It had once said it would not vote for the merger and would seek other buyers for Smithfield because the price offer of $7.1 billion made by Shuanghui undervalued Smithfield, Reuters reported earlier this month.

$7.1 billion is a fair price, Yan Qiang, a partner of Beijing-based Hejun Consulting, told the Global Times on Sunday, noting that the previous objections by Starboard might have just been for bargaining purposes.

The price Shuanghui off-ered does not undervalue Smithfield, Liu Hui, an analyst with CSC Securities, told the Global Times on Sunday, noting Smithfield is not likely to have a higher merger price.

In early September, the Committee on Foreign Investment in the US, which is an executive branch panel that examines foreign investment for potential threats to national security, cleared the potential deal.

Both Yan and Liu predicted that now a major shareholder has issued its approval, the transaction will likely be concluded soon.

However, Liu said that it is hard to see any obvious impact right away on Shuanghui's performance if the transaction succeeds.

After the transaction is competed, Smithfield will continue to use its brand, Liu said. Liu also expected that Shuanghui and Smithfield will sell their products in China and the US separately, without immediate product crossover in each other's markets in the short term.

Cooperation on technology and management will likely follow after the deal but it will not result in a prompt or major increase in Shuanghui's revenue, Liu said, noting the transaction is a long-term strategy.

Smithfield's shareholders will vote on the transaction at a special shareholders' meeting on Tuesday, and if the merger is approved, both Shuanghui and Smithfield expect the transaction to close shortly after the meeting, according to statements on their websites.

Two independent proxy advisory firms, Institutional Shareholder Service (ISS) and Glass Lewis & Co (Glass Lewis) urged shareholders of Smithfield to "vote for" the merger with Shuanghui on the Tuesday meeting, according to a statement released on Smithfield's website on September 13.

ISS described the offer price as "a considerable and certain premium" and Glass Lewis regarded the transaction as "favorable," according to the statement.

If the deal succeeds, it will be the largest Chinese takeover of a US company and experts believe it will be a key step in Shuanghui's globalization process.

Smithfield, a $13 billion global food company, is the world's largest pork processor and hog producer.

Shuanghui International, a Hong Kong-based privately held company, is the majority shareholder of China's largest meat processor, Shuanghui Investment & Development Co, which ranks 128th on the 2013 Fortune China 500 list.