Investors in Smithfield Foods, the pork processor, appeared largely pleased on Wednesday with its proposed $4.7 billion sale to a giant meat producer in China.
But the company’s second-biggest shareholder may not be among them.
The Continental Grain Company, a giant privately held agricultural concern that owns a roughly 6 percent stake, has been a public gadfly to Smithfield of late, calling for the company to be broken into three parts and shake up its board.
With its proposed sale to Shuanghui International, however, Smithfield appears to be taking the opposite tack and keeping itself intact. And it isn’t clear how Continental Grain will respond.
The deal cast a fresh spotlight on Continental Grain, whose low profile belies its status as one of the country’s biggest privately held companies. Founded 200 years ago as a grain trading firm in Belgium, the company is now a multinational agriculture giant still run by its founding Fribourg family.
The company gained a stake in Smithfield about six years ago, when it bought Premium Standard Farms. But it had been relatively quiet until March, when it began calling for a breakup.
Smithfield said publicly that it would review strategic options that would improve value for shareholders. But by that point the company had been in talks for months with Shuanghui, a longtime partner, about forging a deeper relationship. About the time that Continental Grain began calling for a breakup, Smithfield received a formal takeover offer from its Chinese suitor.
C. Larry Pope, Smithfield’s chief executive, told DealBook in an interview that he thought Continental Grain’s actions had some influence on Shuanghui’s timing. The Chinese company liked Smithfield’s vertically integrated model â€" the company’s operations span from raising hogs to slaughtering them and processing them into ham and sausage â€" and had a vested interest in preserving it.
“They wanted to make sure this did not get broken up,†Mr. Pope said.
People close to Shuanghui contend that while Continental Grain’s campaign did not factor much into the deal planning, the Chinese company does favor keeping Smithfield together.
Mr. Pope also defended the sale as a good move for shareholders.
“Continental Grain will benefit from this,†he said.
It isn’t clear yet what Continental Grain will do. While the company is pleased that others view Smithfield as highly valuable, it hasn’t yet decided whether the Shuanghui offer is high enough, a person briefed on the matter said on Thursday.
Continental Grain is still evaluating its options, which may include naming a slate of directors for Smithfield’s board by Friday, this person added.
The investor may be waiting to see if other bidders emerge. Smithfield had been in talks with two other suitors before signing its deal with Shuanghui, people briefed on the matter have said. And the deal agreement specifically mentions two unidentified parties who qualify as special bidders who can continue talking to the company for 30 days.
It’s unclear who might emerge, however. The chief executive of Charoen Pokphand Foods, a Thai food company, acknowledged on Thursday that his company had been working on a bid for Smithfield.
And JBS of Brazil, the world’s biggest meat packer, reportedly won’t challenge Shuanghui’s offer, according to Dow Jones.
