This content is from: Portfolio

The Morning Brief: Starboard’s Newest Target

Jeffrey Smith’s hedge fund firm Starboard Value has moved on to its next target. The activist manager has fired off a letter to the board of directors of Smithfield Foods, urging the food processing company to seek a higher price for the company than the $34 a share offer from Shuanghui International Holdings that it agreed to on May 29. The hedge fund, which owns 5.7 percent of Smithfield and says it has been a shareholder since March 2013, claims its sum-of-the parts value of the company’s operating divisions — which include hog production, international, and pork — far exceeds the current price of the stock. It is calling for a separation of these businesses, which could be worth between $44 and $55 per share. 

Starboard also claims there are numerous interested parties for each of the operating divisions. Yahoo Finance columnist Mike Santoli has been publicly skeptical of Starboard, saying the manager engages in “spreadsheet activism” and may be trying to earn extra profits rather than truly break up the deal. Shuanghui International’s $34 offer was a 25 percent premium to the price of Smithfield at the time of the announcement.

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Orchard Supply Hardware Stores, a small holding of ESL Partners founder Eddie Lampert’s concentrated portfolio, filed for Chapter 11 bankruptcy protection. Home improvement competitor Lowe’s is planning to buy a majority of its assets for $205 million in cash. Orchard also warned it may not be able to make its scheduled payments on some of its huge amounts of debt in December 2013. The retailer was spun off from Sears in January 2012.

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The Dow Jones Credit Suisse Hedge Fund Index rose 0.42 percent in May and 5.43 percent for the first five months. The best performer among 10 sub-strategies was distressed investing, up 2.38 percent in May and 8.92 percent so far this year, followed closely by event-driven multistrategy, up 8.26 percent for the year.

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More woes for commodity funds: The Newedge Trend Index fell 3.65 percent in May, trimming its gains for the year to 2.58 percent. The index is is equally weighted and calculates the daily rate of return for a pool of the largest 10 trend following based CTAs that are willing to provide daily returns and are open to new investment. The P/E Investments (FX aggressive) index was the top performer in Newedge’s database in May, up 11.69 percent.

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Michael Hintze, founder of London-based hedge fund firm CQS, is being knighted. Hintze, a big donor to the conservative Tory party and a major philanthropist, ranked 18th on the rich list after earning $265 million in 2012.



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