UPDATE: D.A. Davidson Reiterates Buy Rating, Raises PT on Smithfield Foods Following Shuanghui International Agreement

In a report published Thursday, D.A. Davidson analyst Tim Ramey reiterated a Buy rating on Smithfield Foods SFD, and raised the price target from $32.00 to $38.00. In the report, D.A. Davidson noted, “China-based Shuanghui International Holdings Limited agrees to acquire all of SFD's outstanding shares for $34.00 per share in cash. This equates to a 31% premium to the closing price on May 28, 2013. The $34 acquisition price represents 10x our FY14 EPS estimate of $3.40, and 13.3x the Street consensus of $2.56. On an EV/EBITDA basis, the deal is 6.2x our 2014 estimates. While we view the deal as fairly price it is clearly not fully priced. Any number of companies could buy Smithfield at a premium to the $34 bid and have an accretive transaction. We would not be surprised to see a higher offer in the near term. The deal must gain regulatory approval under applicable U.S. and specified foreign antitrust and anti-competition laws, The Committee on Foreign Investment in the United States and other customary closing conditions. We think the acquisition is likely to be approved, and could close as early as six weeks from now. Management expects the deal to wrap up in the back half of CY13.” Smithfield Foods closed on Wednesday at $33.35.