November 26, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Chinese food supplier Zhongpin (Nasdaq: HOGS ) jumped as much as 17% today on news that it agreed to a merger with privately held Golden Bridge Holdings, which will value the shares at $13.50.
So what: The decision effectively means that Zhongpin is being taken private by its chairman and CEO, Xianfu Zhu, and his partners, who already own 26% of the company. Zhongpin's board of directors approved the deal and have recommended that shareholders accept the agreement. Zhongpin sells pork products and other foods at 3,400 retail locations in China.
Now what: it's hard to argue with a jump in the stock on a buyout offer, especially when shares are still trading under the $13.50 premium. However, one law firm has already announced a suit over breach of fiduciary duty, stating that, among other matters, the book value of Zhongpin shares are $14.29, so this may be not yet be a done deal. The agreement with Golden Bridge values the publicly held shares of Zhongpin at $418 million. With the growing middle class in China, the pork processor figures to be a valuable enterprise. Either way, this looks like a win for shareholders.
Don't miss the latest news on this company before it goes private. Add Zhongpin to My Watchlist.
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