Brazilian meatpacker JBS plans to sell US$1.8 bln in assets

SAO PAULO/CHICAGO: Brazilian meatpacker JBS SA revealed plans to sell assets worth US$1.8 billion, putting dairy, poultry and cattle feeding units on the block to cut debt after a corruption scandal raised concerns about its financing costs.

JBS, whose controlling shareholder recently agreed to pay a massive leniency fine after becoming embroiled in sweeping graft probes that have ensnared politicians and executives, said in a securities filing that its board and state development bank BNDES still had to approve the planned asset sales.

The sales, which aim to raise 6 billion reais ( US$ 1.8 billion), include a 19.2 per cent stake in Brazil-based dairy company Vigor Alimentos SA, along with its Northern Ireland unit Moy Park Ltd and Five Rivers Cattle Feeding in North America.

The largest asset on the block is Moy Park, which JBS bought from Brazilian rival Marfrig Global Foods SA two years ago for US$1.5 billion.

Moy Park supplies 25 per cent of chicken consumed in western Europe, according to its website.

It is one of Britain’s top 10 food companies, with 13 processing and manufacturing units in Northern Ireland, England, France, the Netherlands and Ireland.

Five Rivers, the biggest US cattle feeding operation, has a combined capacity of more than 980,000 head of cattle and locations in Colorado, Kansas, Oklahoma, Texas, Arizona, and Idaho, according to its website.

It handles nearly 10 per cent of cattle placed annually on US feedlots, according to the Livestock Marketing Information Center.

Five Rivers also manages a 75,000-head capacity feedyard in the Canadian province of Alberta.

Just two weeks ago, JBS said core US assets were not for sale.

JBS bought Five Rivers from Smithfield Foods Inc, the world’s biggest pork producer, in 2008, along with other beef assets.

Smithfield is now interested in getting back into the US beef business, as well as poultry, its owner China-based WH Group Ltd told Reuters earlier this month.

Smithfield declined to comment on Tuesday when asked if it was interested in the Five Rivers assets.

Cargill Inc, another major US beef processor, also recently exited the cattle feeding business.

Concerns that JBS might sell cattle slaughter operations, which could have cut into demand for feeder cattle, pushed US feeder cattle futures to nearly a two-month low of 140.775 cents per pound after the JBS announcement.

They later rebounded to trade down 0.075 cent at 144.925 cents.

“Originally, we were unsure if a packer would have to close a plant or something like that.

This is just divesting itself from a feeding unit that someone else could buy and operate,” said David Hales, a US cattle analyst. — Reuters