A separation of Smithfield's three integrated foods units is feasible without "tax leakage" that is usually part of asset sales or spinoffs and the company's pork processing unit contains significant room for operational efficiency and margin growth, Starboard argued in its letter.
While the hedge fund appears to see reason for Smithfield to divest its hog and international businesses and retain its pork operations, Starboard also says several strategic acquirers are likely for each of Smithfield's divisions.
Earlier in June,
, once a top shareholder in Smithfield Foods, said it would support the company's
Prior to Smithfield's May 29 announcement of a takeover proposal, Continental Grain had sought to split up the vertically integrated pork manufacturer.
Continental Grain argued the sum of Smithfield's hog production unit and its meat processing and distribution operations internationally could be worth $40 a share.
According to press reports, Continental Grain's proposal to break apart Smithfield's vertically integrated operations was a catalyst for the company's eventual sale to Shuanghui, China's largest meats processor.
Smithfield will allow Shuanghui International to meet the growing demand in China for pork by importing high-quality meat products from the U.S., the company said in a statement when announcing the May 29 acquisition. "The combination creates a company with an unmatched set of assets, products and geographic reach."
The deal is expected to close in the second half of 2013 and still faces key approvals from Smithfield shareholders.
-- Written by Antoine Gara in New York