Shuanghui secures financing for Smithfield Foods merger; stakeholder threatens deal

September 4, 2013

Shuanghui International Holdings Ltd. has entered into a facilities agreement with Bank of China Ltd., Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (also known as Rabobank International), Credit Agricole Corporate and Investment Bank, DBS Bank Ltd., Natixis, The Royal Bank of Scotland plc, Standard Chartered Bank (Hong Kong) Ltd., and Industrial & Commercial Bank of China (Asia) Ltd., whereby Shuanghui will obtain approximately $4.0 billion in debt financing to fund its pending acquisition of Smithfield Foods.

As previously announced, Shuanghui and Smithfield entered into a definitive merger agreement in May 2013, whereby Shuanghui would acquire Smithfield pursuant to a merger in which the Smithfield shareholders will receive $34.00 per share in cash for each share of Smithfield common stock that they own.

The consummation of the merger is conditioned on Smithfield shareholder approval, certain regulatory approvals, and other customary closing conditions. In addition, the funding of the $4.0 billion credit facility is also subject to approval of the merger by Smithfield shareholders and certain other customary closing conditions. Smithfield’s shareholders are scheduled to vote on the transaction at a special shareholders meeting to be held on Sept. 24, 2013. The transaction is still expected to close in the second half of calendar 2013.

However, according to The Wall Street Journal, Smithfield Foods stakeholder, Starboard Value LP, wrote in a letter on Sept. 3 to Smithfield shareholders that it plans to vote against the deal with Shuanghui. Starboard holds a 5.7% stake in Smithfield.

The hedge fund revealed its stake in Virginia-based Smithfield in June and argued then that the company would be worth more if it were broken up into three parts—U.S. pork production, hog farming, and international sales of fresh and packaged meats—and then sold. Starboard said Sept. 3 it had received written indications of interest from third parties for each of Smithfield’s assets, which in total imply a value for Smithfield at a price substantially above the $34 a share deal with Shuanghui.

Starboard also said it will vote against the proposed Shuanghui merger in a bid to try to force Smithfield to postpone a special meeting slated for Sept. 24. The company’s board is allowed to consider alternative bids if they are received before shareholder approval of the proposed merger, and Starboard is aiming to buy more time to find a different buyer.

Under the terms of the Shuanghui deal, Smithfield is allowed to delay the meeting if it hasn’t received enough votes to approve the proposed merger. The agreement also includes a Nov. 29 deadline to close the deal.

Shuanghui press release

The Wall Street Journal article