The New York hedge fund Starboard Value is lobbying to have the Smithfield board reconsider the $34 per share offer from Shuanghui, a Chinese firm expected to give Smithfield greater access to the Chinese market. Starboard figures Smithfield could fetch $44-$55 a share if sold in pieces, the Los Angeles Times reported.
The New York Times reported Monday that Starboard has taken on other company boards, such as AOL, but that Smithfield represents a sizable adversary for the investor group.
It may have an uphill battle to get its way. Smithfield had been talking about a deal with two other companies before announcing the Shuanghui option.
Starboard also lost an important ally. Since the deal with Shuanghui was announced in May, Smithfield's stock value has gone up. Continental Grain Co., another large investor that favored breaking up the company, promptly took advantage of the higher prices and sold off its shares, the Times said.
Regardless, while Smithfield's vertical structure makes sense -- it operates hog farms, slaughtering operations and meat processing and wholesale distribution -- Starboard says selling the company piece by piece would fetch a larger total sum down the road.
"We believe there are numerous interested parties for each of the company's operating divisions, and that a piece-by-piece sale of the company's businesses could result in greater value to the company's shareholders than the proposed merger," the hedge fund wrote in a letter to the Smithfield Foods board.
Starboard owns 5.7 percent of Smithfield Foods, which has its headquarters in Smithfield, Va.