JBS sells UK poultry supplier to Pilgrim’s

SAO PAULO: Brazil’s JBS SA agreed on Monday to sell a British poultry unit to US subsidiary Pilgrim’s Pride Corp for $1 billion, preserving revenue in more profitable activities abroad as the world’s biggest meatpacker faces a corruption scandal at home.

In a statement, Pilgrim’s Pride said the purchase of Moy Park, a major supplier of chicken in Western Europe, was negotiated and approved by a special committee comprised of three independent board directors.

Pilgrim’s said the committee “was advised independently and had been granted full authority” over all aspects of the transaction, suggesting the scandal-plagued family controlling the Brazilian meatpacker did not intervene in the decision.

Under the terms of the purchase, which will be funded with cash and debt with parent JBS, Pilgrim’s Pride will keep Moy Park based in Craigavon, Northern Ireland, while retaining Chief Executive Janet McCollum and other senior management.

The deal, which will help JBS make upcoming debt payments, follows a string of asset sales by holding company J&F and controlling shareholders Wesley and Joesley Batista, who are snared in a corruption probe after admitting to bribing 1,893 politicians in Brazil over the past decade.

Management at Pilgim’s Pride said they expected to find $50 million in annual cost savings at Moy Park in the next two years, comparing their plan to the recent integration of assets in Mexico and Minnesota.

Still, analysts on a conference call questioned how they would find synergies in an unfamiliar region where the parent company had not.

Goldman Sachs research analyst Adam Samuelson focused on the “timing” of the deal to buy Moy Park, which JBS acquired from Brazilian rival Marfrig Global Foods SA two years ago for $1.5 billion.

“Was there serious consideration at that time to acquire the business at the Pilgrim’s level?” he asked. “And if not, why ... would it make sense today?”

Pilgrim’s chief executive William Lovette said he had not closely examined the 2015 deal between JBS and Marfrig. “We were focusing on other things at that time.”

JBS has controlled Pilgrim’s Pride since 2009 after paying $2.8 billion for a stake that is now about 75%.

According to two people familiar with Monday’s deal, selling Moy Park to Pilgrim’s Pride should help JBS boost the allure of assets it plans to list in the United States. One of the people called it a “transfer of assets” passing revenue to a holding company for non-Brazilian JBS assets.

The Batistas are aiming to list the division, JBS Foods International, in New York by the end of next year.

Moy Park accounts for about 25% of chicken consumed in Western Europe and is one of the top 10 food companies in the United Kingdom. Pilgrim’s said its bid for Moy Park valued the entire company at $1.3 billion, including debt.