March 5, 2008

More consolidation in US beef industry as JBS buys national beef

More consolidation in US beef industry expected as JBS S.A, the world's top beef processor buys Missouri-based National Beef Packing Company.

The deal would involve US$465 million in cash, US$95 million in JBS stock and assumption of National Beef's debt and other liabilities, US Premium Beef LLC, the majority owner of National Beef announced Tuesday (Mar 4, 2008). 

National Beef is the fourth largest beef processor in the US while JBS is the world's largest. In fiscal year 2007, National Beef generated sales of US$5.6 billion and processed 3.9 million head of cattle.

If approved by regulatory authorities, the deal would give JBS a 28-percent share of the US beef market and would mean that 80 percent of US beef processing capability would be owned by three big companies (the remaining two being Tyson Foods and Cargill Meat Solutions).

The sale will combine all of National Beef's operations and facilities with JBS Swift's beef operations. National Beef President Tim M. Klein will become president and chief operating officer of the joint National Beef/JBS-Swift beef operations.

Some estimates put National Beef's debts and liabilities at more than US$400 million. If so, that means JBS would have paid close to a US$1 billion for JBS. The company bought Swift & Co. last year for about US$1.4 billion.

JBS operates 23 plants in Brazil and six in Argentina. Its acquisition of Swift & Company also gave it ownership of beef plants in Australia and the US

In the year ending September 2007, JBS earned US$11.9 billion and processed 9.0 million head of cattle.

Steve Hunt, CEO of US Premium Beef, said producers will now have a more geographically diversified company with multiple locations to deliver the cattle they produce.