April 16, 2007

 

Brazil's JBS SA eyes Swift

 

 

A Brazilian beef producer is keen on acquiring the financially-besieged Swift & Co, reports the beef publication Cattle Buyer's Weekly.

 

According to publisher Steven Kay, the Sao Paolo-based JBS SA--an international exporter of fresh and processed beef--is in the running to buy Swift with a reported asking price of more than US$1.5 billion.

 

Swift & Co. owners HM Capital Partners has put the company up for sale in January. Swift president Sam Rovit announced last week some movement on that end may be announced in May.

 

Kay said his sources tell him that Swift could wrap up bidding on the global operation next week.

 

National Beef Packing Co., the fourth largest beef processor in the US, emerged early on as a potential buyer when Swift hired JP Morgan Chase to explore its options through either a sale, merger, partnership, refinancing or an initial public offering. National is still believed to be the highest bidder.

 

Kay said it's more likely that a global player will buy Swift, as opposed to it going public as investors shun from the company's low margins and high business risks.

 

Swift has had a rough couple of years, with Asian markets closing to US beef and turning previously record profits at the company into double-digit losses. In December, just when the company began to pick up from the reopening of Japanese markets, Swift was hit with an Immigrations and Customs Enforcement raid, halting operations at six plants across the nation. Swift officials estimate that one day alone cost the company US$30 million.

 

On the other hand, Swift operations in Australia profits increased regularly due to Asian markets being closed to the US.  In the most recent earnings period, Swift Australia sales grew by 14 percent.

 

Kay said JBS' interest to buy Swift was due to large market opportunities and the company being the biggest beef processor in Australia.

 

JBS operates 21 plants in Brazil and five plants in Argentina. Being the largest beef producer in Latin America, the company currently exports beef and beef by-products to customers in more than 110 countries throughout the world. JBS also produces ready-to-eat meals and its sales make it the sixth largest beef company in the world.

 

Kay said the acquisition of Swift would make JBS SA the world's largest exporter of fresh beef.

 

According to a company press release, JBS is in expansion mode with plans to continue growth in its domestic and international markets. But it needs to overcome some adverse conditions¡ªfinancial and commercial¡ªbefore getting into the US, Canada, Mexico, South Korea and Japan, it reports.

 

Kay reports that JBS recently completed its own initial public offering, through which it raised about US$775 million. That, along with other acquisitions in the past couple of years, would help it raise the cash necessary to buy Swift, he said.

 

At present, bidders are going through a "second bidding" in initially meeting the parameters laid out by Swift. Kay said bidders are now going through what is called due-diligence, through which they inspect the books and the plants.