JBS says IPO for U.S. assets will speed debt repayment
são paulo » Brazilian meatpacking giant JBS SA’s shares jumped higher Tuesday after the company announced plans for an initial public offering in the U.S. of shares in its international businesses.
The company unveiled the IPO plan late Monday. JBS Foods International is a new subsidiary of JBS that groups together the company’s international operations. JBS said it would retain control of the new unit — which includes JBS USA, which is headquartered in Greeley — after the sale and will continue to manage and control the company’s Brazilian beef unit operations.
JBS shares rose 19 percent to $3.24 Tuesday. The plan will permit the company to cut debt more quickly and give JBS access to cheaper financing outside of Brazil, cutting its borrowing costs.
“This looks to be positive for shareholders,” said João Pedro Brugger, an economist at investment company Leme Investimentos. “The main thing is they’ll be able to access resources at a moment when credit is restricted.”
Earlier this year, JBS announced a plan to spin off its international businesses into a new company with headquarters in Ireland and list the new company’s shares in the U.S. That plan could have turned the Irish company into the parent of the Brazilian company.
JBS had to cancel that plan after the Brazilian state development bank, or BNDES, rejected the proposal. BNDES owns 20.4 percent of the meatpacker and has a shareholder agreement with the holding company that controls JBS, J&F Investimentos SA, that permits it to veto certain operations.
The plan “is an alternative to the previous proposal and will bring the same benefits,” JBS CEO Wesley Batista said Tuesday in a conference call.
The new plan won’t need the bank’s permission to move ahead, he said. Mr. Batista declined to comment on the BNDES’s opinion of the new proposal.
The BNDES had no immediate comment on the plan.
The company plans to transfer its bonds to the Foods International unit, Batista said. All the proceeds from the share sale will be used to speed up JBS’s plan to reduce debt, he said.
J&F, which is the Batista family investment holding company, also controls a pulp and paper company called Eldorado Brasil Celulose SA, that is under investigation by Brazilian authorities for alleged fraud regarding investments by some Brazil’s biggest pension funds.
JBS chairman Joesley Batista and his brother Wesley have also been targets of the investigation. They have denied any wrongdoing.
JBS isn’t a subject of the probe, but the family’s legal issues are still a concern to some investors, including Brugger.
“I prefer to stay away because I don’t want to take that risk in case something new comes out,” he said