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April 26, 2013

US: Smithfield calls Continental Grain’s split demands “flawed”

Smithfield Foods CEO Larry Pope has labelled demands from major shareholder Continental Grain that the US meat giant should split in three "inherently flawed".

By Dean Best

Smithfield Foods CEO Larry Pope has labelled demands from major shareholder Continental Grain that the US meat giant should split in three “inherently flawed”.

Pope’s comments came after Continental Grain, which first went public with its ideas for Smithfield last month, filed a presentation with the US Securities and Exchange Commission in which it repeated its criticism of the pork supplier.

“Our number one priority is to create long-term value for our shareholders, and we welcome the perspectives of all of our investors. Consistent with this objective, we are continuing to review Continental Grain’s presentation and will provide a specific response in due course,” Pope said yesterday (25 April).

However, he added: “Our board and management are focused on the implementation of our growth strategy that is working. We recently delivered the two best years of operating performance in our company’s history, we have restructured and streamlined our pork segment, drastically de-levered our balance sheet, returned significant cash to shareholders and reduced commodity exposure. As a result of our work, our stock price has nearly doubled since 2009 when Continental Grain resigned from our board.

“Further, we believe that Continental Grain’s analysis of the benefits of a divestiture of our hog production business and select European assets, which they have made before, is inherently flawed, based on an intensive and ongoing review of these and other alternatives by the board, management and our financial and legal advisors.”

Agribusiness Continental Grain, which owns around 6% of Smithfield, has called on the company’s board to consider splitting the business in three to improve returns for shareholders.

The investor suggested Smithfield could be split into a hog processor, a company supplying fresh pork and packaged meats and a business focused on its operations outside the US.

The suggestion by Continental Grain, which criticised Smithfield’s hog and international businesses, follows questions from Wall Street on the meat group’s business structure.

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