Here’s Starboard’s general point:
We believe the Proposed Merger goes a long way towards closing the gap between the pre-deal market value of Smithfield and the intrinsic value of the business. However, we believe the Proposed Merger still significantly understates a conservative sum-of-the-parts valuation of the Company, which we estimate to be worth between $9 billion and $10.8 billion after tax, or approximately $44 to $55 per share, representing an approximate 29%-62% premium to the $34 per share Shuanghui deal.
The problem Starboard faces is that Smithfield has agreed with Shuanghui to a prohibition on seeking superior offers. Starboard says that because of this limitation it is “seeking to identify and connect any strategic or financial buyers for [Smithfield’s] individual business units… .”
Starboard, which owns 5.7% of Smithfield’s stock, says that it is “not necessarily” opposed to the proposed sale of Smithfield, but that the investment firm believes Smithfield can get a better deal. And because Smithfield cannot go looking for other buyers, Starboard will get on the case.
Shares of Smithfield are up about 2.3% in premarket trading this morning, at $33.55 in a 52-week range of $17.55 to $33.96.