Smithfield Foods Inc. (SFD:US), the world’s largest hog producer, should consider splitting up into three businesses after the shares underperformed some competitors, investor Continental Grain Co. said.
The three units would be hog production, fresh pork and packaged meats, and Smithfield’s international operations, Continental said in a letter yesterday. The company should also start paying a dividend, add “several” new directors to its board, and hire an investment bank to evaluate the proposals, said Continental, which holds a 5.8 percent stake (SFD:US) in Smithfield.
Smithfield will review the letter, the Smithfield, Virginia-based company said today in a statement.
“It’s time for Smithfield to get serious about creating shareholder value,” Continental said in the filing. “This is an exciting time in the world of food and agribusiness.”
Smithfield jumped 11 percent yesterday, its biggest gain in two years, after saying the hog business will return to profitability in 2013. Hog farms give Smithfield a competitive advantage and selling them would be a “big mistake,” Chief Executive Officer C. Larry Pope said yesterday in a response to a question on the company’s third-quarter earnings conference call.
Smithfield rose 3.7 percent to $25.60 at 8:50 a.m. before the start of regular trading in New York. The stock has climbed 10 percent in the year through yesterday. U.S. competitors Hormel Foods Corp. (HRL:US) and Tyson Foods Inc. (TSN:US) advanced 34 percent and 21 percent, respectively, according to data compiled by Bloomberg.
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