Will Smithfield Foods of Virginia take over Canada’s Schneider Corporation?
“We see it as a done deal,” said Smithfield vice-president Aaron Trub in a recent interview.
“It’s not a done deal,” said minority shareholder Irwin Michael, of ABC Funds of Toronto, a company that has tendered its shares to a rival bid from Maple Leaf Foods.
Perhaps only a handful of people in Canada – the Schneider family of Kitchener, Ont. – know how done the deal really is.
The battle over control of Schneider has raged since November, when Maple Leaf Foods launched a hostile takeover bid. It offered $19 per share for Schneider. The Schneider board of directors fended off the bid and enacted a poison pill defence as it sought other offers.
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Maple Leaf boosted its offer to $22, but Schneider soon announced the family had tendered its shares to Smithfield for the equivalent of $25 each in Smithfield shares. Schneider chair Doug Dodds said the deal between the family and Smithfield was “irrevocable.”
The Schneider family owns 75 percent of the company’s voting stock, but less than half its equity.
Maple Leaf didn’t give up after the announcement of the Smithfield deal. It boosted its offer to $29 per share and locked up as many Schneider shares as it could. Its bid has been extended to Jan. 29.
Michael, whose investment fund company supports the Maple Leaf bid, said there is no question the Smithfield bid is worth less. Not only is the Maple Leaf offer better because “cash is king,” but the value of the Smithfield offer has fallen substantially since it was announced in December.
The value of Smithfield shares has dropped from $32-$33 (U.S.) to about $29.50 now. That makes the value of the Smithfield offer about 26 percent less than the value of Maple Leaf’s bid, Michael said. It is now worth $23 per Schneider share or less.
But Michael also pointed out that no offer other than Maple Leaf’s has been made to minority shareholders.
Dodds said the Smithfield offer must be approved by the American Securities and Exchange Commission before it can be extended to all shareholders of Schneider. That will likely not happen until February or early March.
On Monday Dodds repeated that he believes the Schneider family’s deal with Smithfield is irrevocable, but said he has never seen the agreement.
He said minority shareholders will receive the same offer the Schneider family has accepted once the SEC approves the Smithfield bid because of a “coattail provision” from the family.
But regardless of how many shares Smithfield buys if its offer is made, it will gain control of the company because of the Schneider family’s voting shares, Dodds said.
Michael said the only offer on the table now is Maple Leaf’s, and he hasn’t spoken to anyone who knows what’s in the Schneider family’s deal.
“It might be a deal that was just cut between the four family members,” he said.
Maple Leaf chief financial officer Tom Muir has said the Schneider family’s deal might not be as irrevocable as claimed because no one knows what is in it.
Michael said it was his duty to tender his shares to Maple Leaf because he has to get the highest price possible for his shareholders.
He said he hasn’t given up the Schneider takeover as a done deal because too many areas remain murky. Maple Leaf may even try to make a deal with Smithfield, or alter its bid again, he said.
“Stranger things have happened.”
Which means the fate of Schneider will not be clear for weeks to come.
