JBS seeks US$1.23 billion in stock sale

Brazil's JBS SA, the world's largest beef processor, may raise as much as BRL2.16 billion (US$1.23 billion) with the sale of new shares to fund its direct distribution business.

The Sao Paulo-based company, which processes an average of 35,000 heads of cattle a day, plans to sell 200 million new common shares in a primary offering, the equivalent of an 8.4% stake, according to a prospectus filed over the holiday weekend. JBS shares dropped 0.7% at mid-afternoon to BRL8.08.

The offering may increase by 70 million shares if underwriters exercise an option to sell additional stock to meet demand. JBS expects to price the stock sale on April 27.

JBS, which started as a small abattoir in Brazil's Midwest, has ballooned in size in recent years through a series of acquisitions in the US, Europe and Asia to become the world's biggest beef exporter, the No. 2 global poultry company and the No. 3 US pork processor.

The company plans to use two-thirds of the proceeds from the stock offering to expand its direct sales business, including acquisitions of distribution centres and delivery trucks. The remaining funds will be set aside for working capital.

JBS posted a profit of BRL129.4 million in 2009 on sales of BRL34.31 billion, compared with a profit of BRL25.9 million on sales of BRL30.34 billion the previous year.

JBS plans to tap a market in Brazil that has shown more appetite for so-called follow-on stock sales than initial public offerings.

JBS hired BTG Pactual, the Brazilian investment bank controlled by billionaire Andre Esteves, as lead underwriter of the offering. JPMorgan, Santander Brasil and the investment banking units of Bradesco and Banco do Brasil will also help manage the offering.

Banks stand to earn as much as BRL54 million in fees from the stock sale, or the equivalent of 2.5% of the total offering.