Continental sells stake in Smithfield

Published on: Jun 4, 2013

Continental Grain Co., which had been critical of the vertically integrated business structure at Smithfield Foods Inc., announced that it sold its entire position in the company and will not oppose the proposed acquisition of Smithfield by the Chinese investment house Shaunghui International.

Continental had been one of Smithfield's biggest shareholders, with an approximate 6% stake that Continental accumulated six years ago in Smithfield's acquisition of Continental's Premium Standard Farms. At the time, Premium Standard was a vertically integrated hog production and pork processing company.

Continental, earlier this year, called for Smithfield to create additional shareholder value by breaking up its vertically integrated structure, establishing three separate companies: a hog production company and a fresh pork and packaged meats company in the U.S. and an international hog production and pork processing company in Europe (Feedstuffs, March 18).

However, Smithfield rejected the concept, arguing that its vertically integrated structure gives it significant flexibility to meet customer demand, such as demand for ractopamine-free and stall-free pork (Feedstuffs, April 8).

Continental chair and chief executive officer Paul J. Fribourg said he "congratulates" Smithfield on the proposed deal with Shuanghui. "We have been advocating for value creation and are pleased that the Smithfield board of directors and management are being proactive" in providing that value "for the benefit of all shareholders," he said.

Continental said it sold its shares for an average price of $32.88 per share on May 31.

Shuanghui announced on May 27 that it would buy Smithfield for $34.00 per share, or $4.7 billion (Feedstuffs, June 3). Including an assumption of debt, the deal has a total value of more than $7 billion.

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