0000950142-13-000561.txt : 20130307 0000950142-13-000561.hdr.sgml : 20130307 20130307170539 ACCESSION NUMBER: 0000950142-13-000561 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20130307 DATE AS OF CHANGE: 20130307 GROUP MEMBERS: ARLON OPPORTUNITIES MASTER LP GROUP MEMBERS: CELINE FRIBOURG GROUP MEMBERS: CHARLES FRIBOURG GROUP MEMBERS: CONTINENTAL GRAIN CO GROUP MEMBERS: PAUL J. FRIBOURG SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SMITHFIELD FOODS INC CENTRAL INDEX KEY: 0000091388 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 520845861 STATE OF INCORPORATION: VA FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-07808 FILM NUMBER: 13674146 BUSINESS ADDRESS: STREET 1: 200 COMMERCE STREET STREET 2: EXECUTIVE OFFICE BUILDING CITY: SMITHFIELD STATE: VA ZIP: 23430 BUSINESS PHONE: 7573653000 MAIL ADDRESS: STREET 1: 200 COMMERCE STREET STREET 2: EXECUTIVE OFFICE BUILDING CITY: SMITHFIELD STATE: VA ZIP: 23430 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY EQUITIES CORP DATE OF NAME CHANGE: 19710221 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY REAL ESTATE TRUST DATE OF NAME CHANGE: 19661113 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL GRAIN CO CENTRAL INDEX KEY: 0000929607 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 277 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10172 BUSINESS PHONE: 2122072898 MAIL ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 FORMER COMPANY: FORMER CONFORMED NAME: CONTIGROUP COMPANIES, INC. DATE OF NAME CHANGE: 20050609 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL GRAIN CO DATE OF NAME CHANGE: 19940906 SC 13D/A 1 eh1300353_13da7-smithfield.htm AMENDMENT NO. 7 eh1300353_13da7-smithfield.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 13D
 
Under the Securities Exchange Act of 1934
(Amendment No. 7)*
 
 
SMITHFIELD FOODS, INC.
(Name of Issuer)
 
 
Common Stock, Par Value $0.50 per share
(Title of Class of Securities)
 
 
832248 10 8
(CUSIP Number)
 
Michael Mayberry
Associate General Counsel
Continental Grain Company
277 Park Avenue
New York, NY 10172
Tel. No.: (212) 207-5390
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 
March 7, 2013
(Date of Event which Requires Filing of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 1(f) or 1(g), check the following box  o.
 
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
 
*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
 
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
 
 
(Page 1 of 11 Pages)
               
 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 2 of 11 Pages

 
1
NAME OF REPORTING PERSON OR
 
Continental Grain Company (f/k/a ContiGroup Companies, Inc.)
  
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
 
 
(a)  o
(b)  x
3
SEC USE ONLY
 
 
  
4
SOURCE OF FUNDS
 
OO
  
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
 
 
 o
6
CITIZENSHIP OR PLACE OF ORGANIZATION
 
Delaware
  
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
7
SOLE VOTING POWER
 
-0-
8
SHARED VOTING POWER
 
8,052,099
9
SOLE DISPOSITIVE POWER
 
-0-
10
SHARED DISPOSITIVE POWER
 
8,052,099
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
8,052,099
  
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
 
 o
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
5.8%
  
14
TYPE OF REPORTING PERSON
 
CO
  

 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 3 of 11 Pages

 
1
NAME OF REPORTING PERSON OR
 
Arlon Opportunities Master LP
  
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
 
 
(a)  o
(b)  x
3
SEC USE ONLY
 
 
  
4
SOURCE OF FUNDS
 
OO
  
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
 
 
 o
6
CITIZENSHIP OR PLACE OF ORGANIZATION
 
Delaware
  
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
7
SOLE VOTING POWER
 
-0-
8
SHARED VOTING POWER
 
130,811
9
SOLE DISPOSITIVE POWER
 
-0-
10
SHARED DISPOSITIVE POWER
 
130,811
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
130,811
  
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
 
 o
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
0.1%
  
14
TYPE OF REPORTING PERSON
 
PN
  

 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 4 of 11 Pages

 
1
NAME OF REPORTING PERSON OR
 
Paul J. Fribourg
  
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
 
 
(a)  o
(b)  x
3
SEC USE ONLY
 
 
  
4
SOURCE OF FUNDS
 
OO
  
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
 
 
 o
6
CITIZENSHIP OR PLACE OF ORGANIZATION
 
United States
  
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
7
SOLE VOTING POWER
 
277,953
8
SHARED VOTING POWER
 
8,052,099
9
SOLE DISPOSITIVE POWER
 
277,953
10
SHARED DISPOSITIVE POWER
 
8,052,099
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
8,330,052
  
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
 
 o
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
6.0%
  
14
TYPE OF REPORTING PERSON
 
IN
  

 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 5 of 11 Pages

 
1
NAME OF REPORTING PERSON OR
 
Charles Fribourg
  
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
 
 
(a)  o
(b)  x
3
SEC USE ONLY
 
 
  
4
SOURCE OF FUNDS
 
OO
  
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
 
 
 o
6
CITIZENSHIP OR PLACE OF ORGANIZATION
 
United States
  
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
7
SOLE VOTING POWER
 
25,500
8
SHARED VOTING POWER
 
8,088,200
9
SOLE DISPOSITIVE POWER
 
25,500
10
SHARED DISPOSITIVE POWER
 
8,088,200
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
8,113,700
  
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
 
 o
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
5.8%
  
14
TYPE OF REPORTING PERSON
 
IN
  

 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 6 of 11 Pages

 
1
NAME OF REPORTING PERSON OR
 
Celine Fribourg
  
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
 
 
(a)  o
(b)  x
3
SEC USE ONLY
 
 
  
4
SOURCE OF FUNDS
 
OO
  
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
 
 
 o
6
CITIZENSHIP OR PLACE OF ORGANIZATION
 
France
  
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
7
SOLE VOTING POWER
 
36,101
8
SHARED VOTING POWER
 
25,500
9
SOLE DISPOSITIVE POWER
 
36,101
10
SHARED DISPOSITIVE POWER
 
25,500
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
61,601
  
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
 
 o
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
less than 0.1%
  
14
TYPE OF REPORTING PERSON
 
IN
  

 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 7 of 11 Pages

 
Pursuant to Rule 13d-2(a) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the undersigned hereby amends the Schedule 13D originally filed on May 17, 2007 and amended by Amendment No. 1 thereto filed on October 17, 2007, Amendment No. 2 thereto filed on January 31, 2008, Amendment No. 3 thereto filed on March 4, 2008, Amendment No. 4 thereto filed on October 30, 2008, Amendment No. 5 thereto filed on September 18, 2009 and Amendment No. 6 thereto filed on June 16, 2010 (as so amended, the “Schedule 13D”), relating to the common stock, par value $0.50 per share (the “Common Stock”), of Smithfield Foods, Inc., a Virginia corporation (the “Company” or the “Issuer”).
Item 1.    Security and Issuer.
No material change.
Item 2.    Identity and Background.
This Item 2 is hereby amended and restated in its entirety as follows:

“This Schedule 13D is being jointly filed by the following entities (collectively, the “Reporting Persons”):

(i)  Continental Grain Company, a Delaware Corporation (“CGC”);
(ii) Arlon Opportunities Master LP, a Delaware limited partnership (“AOM”);
(iii) Paul J. Fribourg, a natural person and citizen of the United States (“Mr. Paul Fribourg” or “PJF”);
(iv) Charles A. Fribourg, a natural person and citizen of the United States; and
(v) Celine Fribourg, a natural person and citizen of France.
 
The principal business of CGC is agribusiness and to make investments.  The principal business of AOM is to make investments.  CGC is the managing member of Arlon Opportunities Investors GP LLC, the general partner of AOM and directly and through one of its subsidiaries holds a majority interest in AOM.  Mr. Paul Fribourg is the Chairman, Chief Executive Officer and President of CGC. Mr. Charles A. Fribourg is a director of CGC and Directeur General of Arlon Group (Europe) S.A. (formerly, Finagrain S.A.), a subsidiary of CGC.  Mrs. Celine Fribourg is the spouse of Mr. Charles A. Fribourg.

The principal business address of the Reporting Persons and the executive officers and directors of CGC as set forth below is 277 Park Avenue, New York, NY 10172.  Each of the persons listed below are citizens of the United States.

Executive Officers and Directors of CGC

Paul J. Fribourg
  
Chairman, Chief Executive Officer and President
Michael J. Zimmerman   Vice Chairman
Frank W. Baier  
Executive Vice President and Chief Financial Officer
Teresa E. McCaslin
  
Executive Vice President
David A. Tanner
  
Executive Vice President
Charles A. Fribourg
  
Director and Directeur General, Arlon Group S.A., a subsidiary of Continental Grain Company
Gerald Rosenfeld
  
Director
Stephen R. Volk
  
Director
Morton I. Sosland
  
Director
Henry Kissinger
  
Director
James Wolfensohn
  
Director
Alan Fishman
  
Director
Jim D. Manzi   Director
 
 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 8 of 11 Pages

During the past five years, the Reporting Persons have not, and, to the best of their knowledge, no other person identified in response to this Item 2 has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which such person was or is subject to judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Item 3.    Source and Amount of Funds or Other Consideration
No material change.
Item 4.    Purpose of Transaction.
This Item 4 is hereby amended and supplemented to add the following at the end of such section:
 
“On March 7, 2013, CGC sent a memorandum to the Issuer's board of directors regarding, among other things, the Issuer’s business, management, financial condition and the desirability of retaining independent advisors to explore various alternatives described in the memorandum to enhance shareholder value.  That memorandum is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 4 as if set out herein in full. Representatives of the Reporting Persons may discuss with the Issuer’s management, board of directors, stockholders and other interested parties, matters relating to the Issuer and the items set forth in the memorandum and other related matters.  Such discussions may include specific recommendations regarding the Issuer’s business, operations, governance, board composition, management, financial condition and opportunities or strategic alternatives that may be available to the Issuer to enhance shareholder value.
 
The Reporting Persons intend to review their investments in the Issuer on a continuing basis. Depending on various factors, including, without limitation, the Issuer’s financial position and strategic direction, actions taken by the board of directors, price levels of the shares of Common Stock, other investment opportunities available to the Reporting Persons, market conditions and general economic and industry conditions, the Reporting Persons may take such actions with respect to their investments in the Issuer as they deem appropriate, including, without limitation, purchasing additional shares of Common Stock or selling some or all of their beneficial or economic holdings and/or otherwise changing their intention with respect to any and all matters referred to in Item 4 of Schedule 13D.”

Item 5.    Interest in Securities of the Issuer.
 
This Item 5 is hereby amended and restated in its entirety as follows:
 
“All calculations of percentage ownership in this Schedule 13D are based on a total of 138,696,747 shares of Common Stock outstanding as of November 29, 2012, as reported by the Issuer in its Quarterly Report on Form 10-Q for the quarterly period ended October 28, 2012.
 
AOM owns 130,811 shares of Common Stock (approximately 0.09% of the total shares of Common Stock outstanding). AOM has the shared power to vote or direct the vote, and the shared power to dispose or direct the disposition of, all such 130,811 shares of Common Stock.
 
CGC beneficially owns 8,052,099 shares of Common Stock (approximately 5.81% of the total number of shares of Common Stock outstanding). CGC has the shared power to vote or direct the vote, and the shared power to dispose or direct the disposition of, all such 8,052,099 shares of Common Stock. The 8,052,099 shares of Common Stock includes the 130,811 shares directly owned by AOM. CGC may be deemed to share voting and investment power with respect to the shares of Common Stock owned directly by AOM by virtue of being the managing member of the general partner of AOM and directly and through one of its subsidiaries holds a majority interest in AOM.
 
Mr. Paul Fribourg directly owns 277,953 shares of Common Stock (approximately 0.20% of the total number of shares of Common Stock outstanding). Mr. Paul Fribourg has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition of, all such 277,953 shares of Common Stock. Of these shares of Common Stock, 11,293 are phantom shares of the Issuer. The phantom stock is payable in shares of Common Stock during the ten years following Mr. Paul Fribourg’s termination as a director of the Issuer. Mr. Paul Fribourg has the sole power to vote or direct the vote of any shares of Common Stock received in respect of such phantom stock.
 
 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 9 of 11 Pages

 
Mr. Paul Fribourg may be deemed to share voting and investment power with respect to the shares of Common Stock beneficially owned by CGC and AOM by virtue of being the Chairman, Chief Executive Officer and President of CGC. In addition, Mr. Paul Fribourg is one of the co-trustees and in one case, a beneficiary, of various trusts established for the benefit of certain members of Mr. Paul Fribourg’s family that collectively control a majority interest in CGC. As a result, Mr. Paul Fribourg may be deemed to beneficially own the shares directly owned by CGC.
 
Mr. Paul Fribourg disclaims beneficial ownership with respect to the shares of Common Stock held directly by CGC and AOM except to the extent of his pecuniary interest.
 
Mr. Charles A. Fribourg personally owns 25,500 shares of Common Stock (less than 0.1% of the total number of shares of Common Stock outstanding).  He has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition of, all such 25,500 shares of Common Stock.  Mr. Charles A. Fribourg may be deemed to share voting and investment power with respect to the shares of Common Stock beneficially owned by CGC and AOM by virtue of being a director of CGC.  He is also one of the co-trustees and in one case, a beneficiary, of various trusts established for the benefit of certain members of his family that collectively control a majority interest in CGC. As a result, he may be deemed to beneficially own the shares directly owned by CGC.  He may also be deemed to share voting and investment power with respect to the shares of Common Stock beneficially owned by his spouse, Mrs. Celine Fribourg.  Mr. Charles A Fribourg disclaims beneficial ownership with respect to the shares of Common Stock held directly by CGC, AOM and Mrs. Celine Fribourg except to the extent of his pecuniary interest.

Mrs. Celine Fribourg personally owns 36,101 shares of Common Stock (less than 0.1% of the total number of shares of Common Stock outstanding).  She has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition of, all such 36,101 shares of Common Stock.  Mrs. Fribourg may be deemed to share voting and investment power with respect to the shares of Common Stock beneficially owned by her spouse, Mr. Charles A. Fribourg.   Mrs. Celine Fribourg disclaims beneficial ownership with respect to the shares of Common Stock held directly by Mr. Charles A. Fribourg except to the extent of her pecuniary interest.
 
Mr. Zimmerman beneficially owns 11,678 shares of Common Stock (less than 0.1% of the total number of shares of Common Stock outstanding). Mr. Zimmerman has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition of, all such shares.
 
The Reporting Persons may be deemed to be a group for the purposes of Section 13(d) of the Exchange Act. This filing shall not constitute an admission by the Reporting Persons that they are a group for such purpose. The Reporting Persons collectively own 8,391,653 shares of Common Stock (approximately 6.05% of the total number of shares of Common Stock outstanding). 
 
The following table sets forth all transactions with respect to the shares of Common Stock effected by any of the Reporting Persons within the last 60 days.  All such transactions were effected in the open market.
 
           
Total 
 
Average Price
  
Entity
  
Trade Date
  
Transaction
  
Shares 
 
Per Share $
  
Continental Grain Company
  
1/7/2013
  
Sold
   45,000     22.9926     
Continental Grain Company
  
1/8/2013
  
Sold
   45,000     22.9413     
Continental Grain Company
  
1/9/2013
  
Sold
   45,000     22.7896     
Continental Grain Company
  
1/10/2013
  
Sold
   45,000     22.8020     
Continental Grain Company
  
1/11/2013
  
Sold
   45,000     22.5791     
Continental Grain Company
  
1/14/2013
  
Sold
   45,000     22.6567     
Continental Grain Company
  
1/15/2013
  
Sold
   45,000     22.8079     
Continental Grain Company
  
1/16/2013
  
Sold
   45,000     22.8130     
Continental Grain Company
  
1/17/2013
  
Sold
   35,000     23.0201     
Arlon Opportunities Master LP
  
3/1/2013
  
Sold
   117     22.0800     
Arlon Opportunities Master LP
   3/1/2013   Bought   117     22.0800     
Continental Grain Company   3/5/2013   Sold   439,099     22.5047     
Continental Grain Company   3/6/2013   Sold   315,000     22.3883     
Continental Grain Company    3/7/2013     Sold         417,000     24.1940     
 
No person other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any securities owned by of the Reporting Persons.”
 
Item 6.    Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.
 
No material change.
 
 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 10 of 11 Pages

Item 7.    Material to be Filed as Exhibits.
 
 
 
 
 
 
 
 
 
 
CUSIP No. 832248 10 8
 
 SCHEDULE 13D
Page 11 of 11 Pages

 
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
 
Dated:  March 7, 2013
 
   
CONTINENTAL GRAIN COMPANY
 
 
   
 
By: 
/s/ Paul J. Fribourg
     
Name: Paul J. Fribourg
Title:   Chief Executive Officer and President
 
 
   
ARLON OPPORTUNITIES MASTER LP
   
 
By:
 
Arlon Opportunities Investors GP LLC,
its General Partner
   
 
By:
 
Continental Grain Company,
its managing member
 
   
 
By: 
/s/ Paul J. Fribourg
     
Name: Paul J. Fribourg
Title:   Chief Executive Officer and President
 
 
     
   
/s/ Paul J. Fribourg
     
Paul J. Fribourg
 
 
     
   
/s/ Charles A. Fribourg
     
Charles A. Fribourg
 
 
     
   
/s/ Celine Fribourg
     
Celine Fribourg
 
 
 
EX-99 2 eh1300353_ex01.htm EXHIBIT 1 eh1300353_ex01.htm
EXHIBIT 1
 
 
AGREEMENT REGARDING THE JOINT FILING OF SCHEDULE 13D
 
The undersigned hereby agree as follows:
 
(i)           Each of them is individually eligible to use the Schedule 13D to which this Exhibit is attached, and such Schedule 13D is filed on behalf of each of them; and
 
(ii)          Each of them is responsible for the timely filing of such Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning such person contained therein; but none of them is responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate.
 
Date:  March 7, 2013
 
   
CONTINENTAL GRAIN COMPANY
 
 
   
 
By: 
/s/ Paul J. Fribourg
     
Name: Paul J. Fribourg
Title:   Chief Executive Officer and President
 
 
   
ARLON OPPORTUNITIES MASTER LP
   
 
By:
 
Arlon Opportunities Investors GP LLC,
its General Partner
   
 
By:
 
Continental Grain Company,
its managing member
 
   
 
By: 
/s/ Paul J. Fribourg
     
Name: Paul J. Fribourg
Title:   Chief Executive Officer and President
 
 
     
   
/s/ Paul J. Fribourg
     
Paul J. Fribourg
 
 
     
   
/s/ Charles A. Fribourg
     
Charles A. Fribourg
 
 
     
   
/s/ Celine Fribourg
     
Celine Fribourg
 
 
 
 
EX-99.1 3 eh1300353_ex9901.htm EXHIBIT 99.1 eh1300353_ex9901.htm
EXHIBIT 99.1
 
 
 
   
March 7, 2013
 
 
To:
Board of Directors of Smithfield Foods, Inc.
From:
Continental Grain Company
 
Continental Grain has been a large shareholder of Smithfield Foods (“Smithfield” or “SFD”) for nearly seven years. During that time, we have patiently urged the Smithfield Board and its top management to focus on the creation of shareholder value and the implementation of customary corporate governance standards, with the goal of building a world-class company for the benefit of all stakeholders. Good progress has been made in some areas, but, to the dismay of many, very little benefit has flowed to the shareholders.

Since the current management took over on August 31st, 2006 and through March 1, 2013, Smithfield stock has declined by 26 percent while, including dividends, Tyson stock returned +70 percent and Hormel returned +131 percent -- a shocking divergence in shareholder return among industry competitors. During this time, Smithfield has paid no cash dividends, while Tyson has cumulatively paid $429 million and Hormel has paid $728 million.

Despite the poor performance of Smithfield stock (last year alone it was down 11 percent while the S&P was up 16 percent), management has been extremely well compensated. The CEO has received $37 million in total compensation over the past two years.

While we have reduced our position, we continue to hold an important stake and are prepared to maintain a significant holding if we see the Board and management taking the necessary steps to unlock the value we believe exists in this company. Smithfield has extraordinary assets and had a long track record under the previous management team of being one of the highest performing companies in the industry. It needs to regain that level of performance.  In order to do so, the board should consider the actions outlined below. In reviewing these, please note the following:

 
1.
We believe it is essential that the Board of Directors of Smithfield engage an independent investment banking firm that can assist the Board in evaluating and implementing the various alternatives we are proposing in this memo.

 
2.
We recognize that management and the Board have access to greater information than we and other shareholders possess. However, we are confident that, after giving these alternatives serious consideration, with the advice of independent professionals, you will have advanced the interests of all shareholders.
 
 
3.
We hope and expect that this analysis and independent review will have full transparency with the company’s shareholders.
 
 
·
Analyze splitting the company into three completely independent companies.
 
 
 
 
 
 
o
We believe the company operates in three distinct and different businesses:
 
 
§
1) Hog production;
 
§
2) Fresh pork and packaged meats; and
 
§
3) International (Europe)
 
 
o
Splitting the company into three pieces with dedicated high quality management teams running each segment separately would unlock significant value.
 
 
§
Hog production: While vertical integration, traceability, and quality control are valuable, there are many ways to achieve this through supply agreements, as other companies have done (e.g. Hormel, JBS, Tyson, etc.). The hog production segment has produced net negative returns in 3 out of the past 5 fiscal years and uses very significant amounts of the company's capital. It is a major drag on Smithfield’s stock price and multiple.  CEO Larry Pope acknowledged this in the most recent earnings call when he said:
 
"If you value this segment (pork processing including packaged meats) like our competitors, I think you will see this business alone is essentially worth more than the whole market capitalization of Smithfield Foods. That means our live production and international business all combined are worth very little." We believe there IS value in hog production and international, but not as a part of Smithfield’s current configuration.
 
The inclusion of several of the processing plants that have a significant amount of export business in this segment should also be considered. This might have the benefit of creating an investment vehicle that would be of particular interest to Asian investors. Meanwhile, supply agreements from those plants can support continued supply to the fresh pork and packaged meats segment.
 
 
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International: There has been well over $1 billion invested in the European businesses (Campofrio, Romania, and Poland) with very little, if any, return until recently. Returns on invested capital remain disappointing. There is no real relationship between these businesses and the US operations of Smithfield. Nor is any real benefit being obtained from trying to get these businesses to work together. A strategic review, again working with professional independent investment banking or consulting firm, should be undertaken to explore how to realize value. Alternatives might include the sale of one or more of these businesses, their merger into one company led by world class European agribusiness and branded marketing management, and/or a spin-off. Campofrio is already a public company and a “pure play” in branded processed meats. Smithfield’s ownership of "new Campofrio" might be spun off to its shareholders, along with new leadership that has the consumer packaged goods experience to maximize the value of this asset.
 
 
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US processing and packaged meats businesses: This can be a uniquely valuable piece of Smithfield.  Packaged meats now represent 38% of Smithfield’s sales. When fresh processed pork is included, the total exceeds 70% of sales.  If run by experienced packaged food and consumer product executives, it can be a very exciting company with good growth potential and a very attractive earnings multiple. Companies such as Hormel and Hillshire Brands are real-time examples of that valuation potential.  If Larry Pope is correct, and we believe he is, this segment alone should be worth more than the entire market cap of Smithfield, and even assuming modest values for the production and International pieces, the total should be worth significantly more than the current value of the company.
 
 
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China strategy: Smithfield has talked a lot about this key market, where 50 percent of the world's pork is produced and consumed, but very little has been accomplished to date.  We believe that there are unique opportunities for Smithfield in China, including agreements for long term supply of US pork; marketing the Smithfield brands in China (something that Hormel has done very successfully); and selective investments in China’s growing modern pork industry, in partnership with first class Chinese companies. Smithfield must have a clear strategy to take part in the growing demand for high quality, safe and nutritious foods in this key market.
 
 
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Share repurchase/Dividends
 
 
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Smithfield's balance sheet is as strong as it has been in many years and should provide an opportunity to return capital to shareholders in a thoughtful manner. We applaud the repurchase program the company has continued to execute, and believe that follow-on programs should be authorized. It should be continued as long as the balance sheet is not overly leveraged and the stock continues to trade at such low multiples of earnings. This is one of the most effective ways that management can increase shareholder value, essentially allowing long-term shareholders to own an increasingly greater percentage of the company at attractive multiples.
 
 
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In addition, a  regular cash dividend should be initiated which would support management's assertion that, because of their focus on pork processing and packaged meats, the business has much greater earnings visibility than it did when it was more dependent on hog production. There should be a regular dividend along the lines of what competitors like Hormel or Tyson pay, which would encourage a more stable shareholder base, while returning capital to shareholders.
 
 
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Board of Directors
 
 
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We believe that the addition of several directors with strong backgrounds in agribusiness management, branded consumer packaged goods, value creation, and broad business skills would help the company refocus itself and be an integral part in unlocking the value that lies in Smithfield. Smithfield competes in what is becoming a global industry, its brands are national, yet the board composition reflects the regional focus of yesterday.
 
 
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Management
 
 
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As mentioned above, we applaud many of the positive steps management has taken in recent years. But they have been unable to unlock the real value of this company for the benefit of its owners. The analysis and execution of a new strategy (focused on splitting into three businesses) will require very different skills and abilities. To succeed, we believe it will require the addition of managers with extensive experience in these three areas to bring Smithfield back to the performance level it is capable of.
 
 
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Compensation should be tied to shareholder value creation. There is clearly a disconnect in the current compensation plans.
 
 
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Conclusion
 
 
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It's time for Smithfield to get serious about creating shareholder value. This is an exciting time in the world of food and agribusiness. There are many very positive trends and opportunities in the fields in which Smithfield operates. The three pieces of “New Smithfield” can achieve excellence and high returns in each of their focused market segments.
 
 
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Six years is sufficient time for a management team to provide real results to its shareholders. We haven't seen those results and believe a new strategy with some new individuals is warranted to bring the company back to the high returns that Smithfield has produced in the past and is capable of producing going forward.  Smithfield’s valuation should reflect its full potential. We welcome the opportunity to meet with Smithfield’s Board and management to discuss in more detail the ideas that we have presented.
 
 
 
 
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