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JBS quickly building poultry monster in Brazil
Story Date: 2/19/2013
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Source: Bob Moser, MEATINGPLACE, 2/18/12
JBS SA's November purchase of debt-ridden local poultry processor Agrovêneto for BRL128 million (US$65.5 million) was approved Feb. 14 by Brazil's anti-trust regulator, the Administrative Council for Economic Defense, or CADE.
The new assets will be folded into JBS Aves (“Birds,” in Portuguese), a division created in 2012 to focus the company's production and sale of poultry- and pork-based products. The majority of JBS' acquisition offer involves assuming Agrovêneto's debts.
CADE officials concluded that the poultry production capacity of Agrovêneto and JBS Aves together did not hold a large enough share of the domestic market to threaten competition. As of 2011, roughly 70 percent of national poultry production was sold domestically, CADE reported.
The move came just days after Brazilian investment bank BTG Pactual reinforced its buy recommendation for JBS SA and BRF Brasil Foods in a report, citing forecasts of improved global grain stocks and the subsequent relief on costs for meat processors.
BTG analysts Thiago Duarte and Enrico Grimaldo said they expect JBS to benefit from a relief of feed grain costs, and highlighted capacity cuts in the United States over the past year as a boon to JBS USA. Japan's recently adopted rules allowing import of more U.S. beef should also help, they wrote.
Japan will begin to allow the purchase of beef from cattle slaughtered in the U.S. up through 30 months of age. Currently, Japan only accepts beef from cattle aged up to 20 months. The average age of slaughtered cattle in the U.S. is 18 months.
JBS reached a deal to acquire Agrovêneto on Nov. 3, with BRL10 million (US$5.1 million) paid in JBS shares, and BRL118 million (US$60.4 million) in assumption of the struggling processor's debt.
Located in Nova Veneza, Santa Catarina state, Agrovêneto offers a poultry processing capacity of 140,000 birds per day, and produces more than 30 products domestically and for export, includes frozen and seasoned cuts.
JBS kicked off its poultry acquisitions in Brazil in May 2012, when it signed a deal to lease the Brazilian assets of bankrupt French processor Doux, known locally as Frangosul. JBS should soon boast processing capacity of 1.45 million birds per day in Brazil.
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