Brazilian beef producer JBS to become world’s largest meat maker with Pilgrim’s Pride deal
Emily Fredrix September 16th, 2009 Brazil beef producer to be world’s largest meat co
MILWAUKEE — A Brazilian meat conglomerate could leap ahead of American meat producer Tyson Foods Inc. to become the world’s largest meat company with two deals announced Wednesday that would expand its interests in beef, dairy and chicken.
One of the deals would take struggling Texas chicken producer Pilgrim’s Pride Corp. out of bankruptcy court protection, while the other merges Brazilian beef producer JBS SA said with Bertin SA, one of Latin America’s largest producers and exporters of milk products, beef and leather.
JBS cemented its status as an international meat conglomerate with its 2007 purchase of Greeley, Colo.-based Swift & Co. for $225 million. It said the newly minted JBS-Bertin will make it the world’s largest meat producer.
With annual revenue forecast at $28.7 billion, JBS-Bertin will edge out Springdale, Ark.-based Tyson Foods Inc., which brought it just under $27 billion in its fiscal 2008.
JBS-Bertin will have operations in North and South America, Africa, Europe, Russia, China and Australia.
“We have already passed Tyson and we’re just starting. We made it all the way here, and we are in a capacity to continue investing,” JBS CEO Joesley Batista told reporters at a news conference in Sao Paulo, according to Brazil’s Agencia Estado news agency.
Tyson spokesman Gary Mickelson said the deals may change the rankings in the meat business but “won’t determine which company is the best.
“We remain focused on our own business strategies, which we believe will enable us to continue to provide the best protein products and service, both in the U.S. and around the world,” Mickelson wrote about Tyson in an e-mail.
KeyBanc Capital Markets analyst Akshay Jagdale likened the new company’s U.S. operation to a clone of Tyson and said diversifying with the two new deals was a smart tactic for surviving downturns that affect like chicken more than beef, which has higher profit margins.
The JBS purchase gives a lifeline to Pittsburg, Texas-based Pilgrim’s Pride, which was the largest U.S. chicken producer, with about 23 percent of the market, when it filed for bankruptcy protection late last year. It had been hobbled by debt from its buyout of a competitor and by high feed costs that left much of the industry in a slump.
JBS will buy 64 percent of the stock in the reorganized Pilgrim’s Pride for $800 million, which implies a total company value of $1.25 billion. The deal includes paying off Pilgrim’s Pride’s creditors in full and distributing new stock to current shareholders — something unusual for a company in bankruptcy protection.
Existing shareholders will receive shares in the remaining 36 percent of Pilgrim’s Pride worth $450 million. Including the plan to pay off $1.5 billion in debt, the entire transaction is worth $2.8 billion, Pilgrim’s Pride said.
In addition, the plan calls for exit financing of $1.75 billion, although spokesman Ray Atkinson said the company would not draw all of that.
Terms were not disclosed for the deal to buy Bertin.
Even before the Pilgrim’s Pride deal, rumors of which surfaced earlier this month, JBS was a top producer of beef and pork in the U.S. and worldwide. With the deals announced Wednesday, JBS will be the largest beef producing company in Brazil, Australia, Argentina and Italy.
JBS became the third-largest beef processor in the U.S. after purchasing Swift. The company’s Web site says it is also the third-largest U.S. pork producer.
Batista said the company will continue with an initial public offering in 2010 for JBS USA, which he expects to raise $2.5 billion. He said no more acquisitions are planned for 2009.
“In 2010, however, I expect to make new announcements,” he said.
Pilgrim’s Pride said the deal is subject to antitrust clearance. U.S. regulators earlier this year sued to block JBS’ acquisition of a major beef producer, citing pricing concerns for consumers and producers. JBS later dropped the $560 million deal with National Beef Packing Co., though it did buy Smithfield Foods Inc.’s beef group.
Pilgrim’s Pride, whose creditors’ valid claims would be paid in cash or by issuance of a new note, said it could emerge from bankruptcy court protection by December if the court approves the deal.
Doug Conn, managing director at Hexagon Securities, said it was unusual for shareholders to receive stock — or any value for their shares — from a company in bankruptcy protection.
“This is due to the fact that there is (one) very interested purchaser in the company in its entirety,” he said. “Normally bank assets are sold in parts or shut down.”
Associated Press Writer Marco Sibaja contributed to this report from Brasilia and AP Business Writer Mae Anderson contributed from New York.