What is activist investing, and why is it so popular?

Recently acquired meat company Smithfield Foods could be split into three pieces because of a vocal, highly invested hedge fund

Smithfield
(Image credit: RICH-JOSEPH FACUN/Reuters/Corbis)

Just two weeks after Chinese meat giant Shuanghui International agreed to buy American pork king Smithfield Foods for $4.7 billion ($34 a share), activist hedge fund Starboard Value has posed a different idea: Break the company into three pieces — U.S. pork production, hog farming, and international sales — and lift its value to a whopping $7.1 billion ($44 to $55 a share).

Starboard's suggestion (a pretty strong suggestion, since it owns 5.7 percent of Smithfield's shares) follows a growing trend in activist investing, where activists are targeting larger and larger companies. In March, David Einhorn pushed Apple to cough up billions in dividends; in May, Daniel Loeb suggested Sony break off Sony Entertainment; Carl Icahn continues to needle Dell — the list goes on.

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Carmel Lobello is the business editor at TheWeek.com. Previously, she was an editor at DeathandTaxesMag.com.