April 1, 2011
 

JBS is keen on acquisitions

 

 

Although the world's largest meat-packing company, Brazil's JBS SA is concentrating on organic progress in its global operations, it will not dismiss the possibility of a new acquisition if the opportunity arises.

 

This is especially so if it involves a company that sells packaged food, with well-known brands and a large distribution channel, said the company's chief executive, Wesley Batista.

 

Not surprisingly, the description he gave very much fits the profile of US food company, Sara Lee Corp.

 

In the last few months, there were rumors that JBS was trying to buy the diversified food rival, which JBS never confirmed. Sara Lee now plans to split its coffee and meat businesses, and market observers believe that it could pave the way for another attempt by JBS, as buying a part of the company would be a deal easier to finance.

 

Batista said he does not comment on specific targets. When pressed specifically about Sara Lee, he said that the mentioned company is not for sale currently, but admitted that a business with Sara Lee's profile would make sense for JBS. "When you are buying, you look for a company that has leadership."

 

Besides, Batista said he thinks assets in the US are cheap.

 

JBS grew substantially over the last decade through an aggressive acquisition spree that gobbled up big names such as Pilgrim's Pride, Swift and Bertin.

 

Now, Batista, whose father started the company as a slaughter house, said JBS is everywhere it wants to be. "There is no country in the world where we are not and we would like to be."

 

As for a planned initial public offering of shares in its US operation, Batista said, "It is still in the cards. However, it will not happen until the market is at a level that we think makes sense for JBS."

 

The company posted a fourth-quarter loss of BRL539.3 million (US$325 million), after a profit in the fourth quarter of 2009. JBS attributed the loss to non-recurring expenses, linked to a fee payment to debenture holders, amounting to BRL521.9 million (US$226 million).

 

For the next quarter, profit might get an extra lift with the company's plan to transfer US$2 billion in debt from Brazil to the US. According to Batista, the operation should happen in the next two to three months and will save JBS between US$50-100 million a year with a tax benefit through amortisation. The company has yet to hire a bank to conduct the operation.

 

Besides transferring the debt, JBS said it will not need to go the market anytime soon, as it is now sitting on US$2 billion in cash.

 

As for plans to sell plants in Argentina, where beef producers have been pressured by the government's restrictions designed to protect the domestic price, Batista is very clear by saying that JBS is not actively looking for a buyer. The company would only consider selling some of the plants if the right offer were to be given.