June 1, 2009

JBS to split ownership of Five Rivers

According to the agreement, JBS USA will own the feedlot operation while J&F will own the cattle.

JBS Five Rivers now owns 10 feedlots and charges owners of livestock a daily per head fee to fatten their cattle and take care of the animals until they are ready for slaughter.

J&F Oklahoma Holdings owns up to 800,000 head of cattle on feed, and the company pays JBS Five Rivers a market-based daily cattle feeding fee for the care and maintenance of its animals.

The new agreement now gives J&F Oklahoma a significant working capital burden that is financed as follows since cattle feed for an average of three to five months:

• J&F Oklahoma entered into a three-year, US$600 million revolving credit facility to finance up to 800,000 head of cattle on feed, which serves as a guarantee for the facility.
  
  
• &F Oklahoma also entered into a three-year, US$200 million revolving credit agreement with JBS Five Rivers that mirrors the pricing terms under its bank revolver Credit Facility.

Pursuant to this agreement, JBS Five Rivers feeds and takes care of cattle owned by J&F Oklahoma, which will pay the former for the cost of feed and medicine at cost plus a yardage fee under usual market terms on a per head per day basis. J&F Oklahoma has also agreed to maintain sufficient cattle on JBS Five Rivers’ feed yards so that they are at least 85 percent full of cattle at all times.

Pursuant to this agreement, J&F Oklahoma also agrees to sell to JBS USA at least 500,000 cattle during each year from 2009 through 2011. The price JBS USA pays is based on USDA pricing and a grading grid, which is identical to the grid used for third parties.

JBS Five Rivers was acquired when JBS bought the Smithfield Beef Group last October.