The road is clear for Schneider Corporation to complete its merger with American hog processing giant Smithfield Foods.
Last week an Ontario court dismissed a lawsuit brought by Maple Leaf Foods attempting to prevent the takeover of Schneider by Virginia-based Smithfields. It is unclear whether this buries Maple Leaf’s hostile takeover attempt for Schneider.
Maple Leaf targeted Schneider for takeover in November 1997. It offered $19 a share, but the Schneider family and the company’s management rejected the offer and started seeking alternatives.
Maple Leaf then announced it would build a $112 million hog slaughter plant in Brandon, a move some saw as an attempt to intimidate Schneider into accepting the offer since Schneider’s Winnipeg plant would have a major modern rival on its doorstep. Maple Leaf edged up its offer to $22 per share.
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Then Schneider announced it had approached Smithfield Foods about a friendly merger, and that Smithfield had offered $25 per share, which the Schneider family had accepted.
Maple Leaf jacked up its offer to $29 per share, but the Schneiders stuck to their deal.
In January, a number of shareholders and Maple Leaf Foods launched a court challenge of the Smithfield deal, arguing it was not in shareholders’ interests and that all shares be given voting privileges. This would have removed the Schneider family’s control of the company, and allowed shareholders to pick the Maple Leaf offer instead.
During this time Smithfield put together an application to American securities regulators to allow it to take over Schneider.
On May 11 Ontario judge James Farley ruled against the Maple Leaf Foods shareholder lawsuit. He said Schneider’s board of directors had been responsible and reasonable, and the Schneider family had the right to sell its voting shares to Smithfield.
With the end of the court challenge, all that remains for Smithfield is for regulators to approve its Schneider takeover, and for the company to send an official offer to Schneider shareholders.
Schneider chief executive officer Douglas Dodds said he is glad the court case is over because his company wants to begin transforming itself into a global player.
“We’re now going to be able to form a strategic alliance which will secure a positive future for the Schneider’s brand name,” said Dodds.
All shareholders will be allowed to cash in on the deal, which converts Schneider shares into Smithfield shares at a set value, but only owners of voting shares will be allowed to vote on whether to accept the takeover offer. Since the majority of voting shares are owned by the Schneider family, accepting the offer is assumed to be assured.
While neither Dodds nor Smithfield Foods vice-president Aron Trub would suggest a definite timeline for the offer being made and accepted, Trub said “it shouldn’t be too long.”
Maple Leaf was vague in its reaction.
“We are disappointed with the court’s decision to dismiss our action,” said a Maple Leaf press release. “It is a lengthy judgment which we will be reviewing over the next several days before reaching any conclusion as to our course of action.
“Whether or not the acquisition of Schneider is completed, Maple Leaf Meats will continue to move forward aggressively.”
