POINTING to the examples of Dean Foods Co., Kraft Foods Inc. and Sara Lee Corp., a major shareholder in Smithfield Foods Inc. has sent the company's board of directors a letter urging the company to split into three independent and separate businesses.
Continental Grain Co., which holds about 6% of Smithfield, making it one of the largest shareholders, said Smithfield should conduct spin-offs that would split it into a hog production business, a fresh pork and packaged meat business and an international hog and pork operation.
Continental said the spin-offs would add value to Smithfield stock for its stockholders and noted that Dean, Kraft and Sara Lee all made such moves last year.
Dean spun off 13.3% of its WhiteWave-Alpro business, creating The WhiteWave Foods Co. (Feedstuffs, Oct. 29, 2012); Kraft spun off its North American foodservice and grocery supplies business, establishing Kraft Foods Group Inc. (Feedstuffs, Oct. 8, 2012), and Sara Lee spun off its packaged meat business, forming The Hillshire Brands Co. (Feedstuffs, July 9, 2012).
Smithfield has maintained that its integrated structure allows it to adjust hog production to adjust pork production accordingly to provide the products consumers and export markets want, including antibiotic- and ractopamine-free pork. The company also is transitioning its sow farms to ones that use group pens for gestating sows.
However, Smithfield said its board plans to review the letter "in due course."
Continental also asked for Smithfield to initiate a regular cash dividend and add directors to its board who have expertise in agribusiness and packaged meats.