June 1, 2007

Australia Meat Holdings' acquisition by Brazilian beef maker aims to become world's biggest beef company

Australia's biggest cattle processor, Australia Meat Holdings (AMH), has been sold to Brazil's J & F Participacoes SA as part of a $US1.4 billion transaction aimed to become the world's biggest beef company.

The development was welcomed by local cattle producers as an AMH spokesman said the sale would see little practical change at the Queensland-based company.

Under the deal, AMH's American owner Swift & Co will be sold to J & F Participacoes SA, the controlling shareholder in Latin America's biggest beef processor, JBS. JBS said the acquisition is a major step in seizing market opportunities particularly in Pacific region.

The transaction involves US$225 million in cash and the assumption of US$1.2 billion in debt. The sale is pointed towards creating the world's biggest beef processor, merging Brazil and Australia's biggest players and the third biggest in the US.

AMH operates four plants in Queensland which process around 1.4 million head of cattle yearly and accounts for 26.5 percent of Australia's beef exports.

It has been under foreign ownership since 1994, when Elders sold it to American food giant Conagra. Conagra sold its meat processing operations five years ago to private equity firm HM Capital and Booth Creek Management Corporation, which grouped them under the Swift & Co banner.

Some groups, however, are concerned about the emergence of South America as a beef export powerhouse.

Cattle group Australian Agricultural Co said last week Australia should first develop a comprehensive strategy to deal with the "chilling" threat posed by its lower-cost competitors, particularly as they overcame disease issues restricting access to markets like the US, Japan and Korea.

Cattle Council of Australia president Bill Bray said though Australian producers had not been disadvantaged to date by the country's biggest beef processor being in foreign hands, the sector should continue to monitor the situation to ensure that the local sector will not have a drawback.