NEW YORK (TheStreet) - Smithfield Foods (SFD) is dropping Paula Deen after a deposition indicated the self-appointed queen of southern cooking had used racial slurs against a manager of her Georgia-based restaurants.
Smithfield Foods said Monday it was dropping Deen as a sponsor of the pork producer's products and that the company does not condone discriminatory language.
"Smithfield condemns the use of offensive and discriminatory language and behavior of any kind. Therefore, we are terminating our partnership with Paula Deen," the company said in an emailed statement from Keira Lombardo, a vice president of investor relations and corporate communications.
"Smithfield is determined to be an ethical food industry leader and it is important that our values and those of our spokespeople are properly aligned."The company's move to distance itself comes as Deen has been forced to make multiple apologies to the public and other sponsors such as The Food Network have rescinded their relationship with the cooking guru. "Inappropriate, hurtful language is totally, totally unacceptable," Deen said in a statement posed on YouTube. "I've made plenty of mistakes along the way but I beg you, my children, my team, my fans, my partners - I beg for your forgiveness," Deen said. Her firing from Smithfield also comes amid the meats producer's merger with Chinese foods giant Shuanghui International Holdings, in what would be the largest-ever Chinese acquisition of a U.S. firm. While consensus is that U.S. regulators may support Shanghui's acquisition of Smithfield, which is subject to a review from the Committee on Foreign Investment in the United States (CFIUS) and the approval of shareholders, the merger faces some threats. Some large Smithfield Foods shareholders have said they won't support the $34 a share deal, while turmoil in Chinese financial markets may present a new risk to the debt-financed merger effort. Starboard Value, a burgeoning activist hedge fund with a 5.7% stake in Smithfield said last week it opposes the company's sale and believes the integrated pork processor is worth more broken up in three parts. Smithfield Foods is worth between $43.85 a share and $55.21 a share, according to Starboard, if the company's hog production, international and pork processing operations were split into three separate parts, the hedge fund argued in a June 17 letter to Smithfield's board of directors. Smithfield Foods shares fell over 1% in Monday trading and closed at $32.81, below Shanghui's offer price. Starboard is likely to have a significant annualized profit on its investment in Smithfield Foods even if Shuanghui relents with its $34 a share offer. The fund bought Smithfield Foods shares in March, when shares were about 25% below current levels.
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