July 29, 2010

JBS mulls merging US unit into Pilgrim's Pride

JBS SA, the world's biggest beef producer, is considering making its US$7.1 billion Pilgrim's Pride unit the parent of US operations to limit the influence of Brazil's BNDES state development bank.

JBS is weighing the transaction to prevent Brazil from taking greater control after the state bank bought US$2 billion of convertible bonds, according to industry sources. The bonds are convertible into JBS stock if the Sao Paulo-based company fails to hold an IPO of its JBS US Holdings Inc. unit by 2011.

BNDES could more than double its stake under the offer terms to 34%, from 17%, Rafael Cintra, an analyst said. Under the plan, JBS would merge its existing US business into Pilgrim's Pride and BNDES would take a stake in the combined US unit, according to industry sources.

However, JBS denied the story in a regulatory filing and said it is not in negotiations for a merger or acquisition. JBS executives said on a May 14 that the company had no plans for the IPO of JBS US this year, postponing for a second time the planned share sale.

The company said January 28 it would delay the offering after market conditions deteriorated.

JBS controls more than 10% of global beef processing, after about 30 acquisitions in the past 15 years. The company planned the share sale to expand its distribution network after buying Pilgrim's Pride and Brazil's Bertin SA.

Pilgrim's Pride had sales of US$7.1 billion in the year through September 2009. The operator of chicken processing plants and prepared-food facilities in 12 US states filed for Chapter 11 protection on December 1, 2008, because of liquidity challenges, and was bought by JBS in September 2009.

Pilgrim's fell 47 cents, or 6.2%, to US$7.06 at the 5:15 p.m. close of New York Stock Exchange composite trading.