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JBS plans US public listing next year

Beef Central, 07/12/2016

Brazil’s JBS, the world’s largest red meat processor, plans to launch a public listing of its subsidiary JBS Foods International in the US in the first half of 2017 as a part of a larger company reorganisation.

JBS logoA company statement issued on Monday said under the plan, the JBS Foods International unit would be responsible for managing all of the company’s international operations, while parent company JBS SA would continue to manage beef operations in Brazil.

Just last month, JBS scrapped a plan to move its international headquarters to Ireland, after opposition from BNDES Participações, the investment arm of Brazil’s government-owned development bank, which is a significant shareholder in JBS.

Under the reorganisation, Wesley Batista will become chairman at JBS Foods International, with Gilberto Tomazoni, who has held several positions in the company’s administration for the last four years, taking the post of chief executive officer.

The unit would also manage the large Brazil-based food processing subsidiary Seara Alimentos.

“The company believes the new proposed structure and the IPO plan will reflect its global production platform, its product portfolio and the large international client base,” JBS said in a filing to the Brazilian market regulator.

At the time of the unsuccessful move to relocate the company headquarters to Ireland, Mr Batista, currently chief executive officer of JBS, said the company had other options to change its structure, including a possible US listing.

JBS said it planned to conclude the share offering in the first half of 2017, but had yet to define how many shares it would offer and at what price. More details regarding the reorganisation are expected during a call with investors and analysts today.

JBS currently manages more than 200 production facilities in North and South America, Australia and Europe, marketing fresh and processed beef, lamb pork and chicken products under brands such as Swift, Friboi, Seara, Pilgrim’s Pride, Gold Kist Farms, Pierce, 1855, Primo and Beehive.

The company reported total revenues worth 163 billion reais in 2015 (A$63.7 billion).

Changes mooted in Brazilian Govt’s investment in JBS

Meanwhile, speculation has emerged that the Brazilian Government may reduce or withdraw its long-standing investment in JBS.

Speaking during the World Meat Congress held in South America recently, Sergio De Zen, Investigator in Cepea, University of Sao Paulo, Brazil, suggested that Brazil’s government-backed investment fund BNDES might decide to withdraw its financial participation in major Brazilian food companies, like JBS. The bank’s holding in JBS fluctuates, but currently sits at about 20pc, Beef Central understands.

“It could be a moment of change in the ownership of major Brazilian companies,” Mr De Zen told the conference.

“Brazilian state policies regarding major meat companies are changing. In the past, the state created a policy for the National Bank of Development (BNDES) where companies were selected to receive financial aid from official banks to help them grow and transform into multi-nationals,” he said.

With the changing ideology of the new Brazilian government, this policy, called ‘Policy of Champions’ had now come to an end, Mr De Zen said.

“Now, these companies focus more on results, than on expansion,” he said.

Several times over the past 12 months JBS has emphasised consolidation and integration as business priorities over further expansion.

“This opens the possibility for the BNDES state bank to withdraw its participation in those companies, since the growth component is finished. In commodity markets like red meat, it is very hard for individual enterprises to be successful. There’s been a trend to merge companies, because there’s a need to be big in order to compete successfully in a commodity market,” Mr De Zen told the World Meat Report recently.

BNDES has equity in a number of Brazil’s largest meat companies, including Marfrig, Minerva and Brazil Foods, in addition to JBS. Brazil’s pension funds, currently under considerably financial stress, also have equity in companies like Brazil Foods, and “may have the intention to sell their stake in the companies,” Mr De Zen said.

But who could be the buyers for the BNDES and pension funds stakes in the businesses?

“That we don’t know,” he said. “Investors could come from China or the US; Tyson Foods, for example. We already saw an Arab fund buying part of Minerva and they could be interested in making other investments.”

 

 

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