Brazil's JBS buys Smithfield Beef
05/03/2008
Virginia-based Smithfield Foods has announced that it has signed a definitive agreement to sell its beef processing and cattle feeding operation, Smithfield Beef, to the world's largest beef producer, Sao Paolo-based JBS, for $565 million in cash.
The sale to JBS will include Five Rivers Ranch Cattle Feeding, which is a joint-venture between Smithfield and Continental Grain Company. Smithfield Foods and CGC have agreed that, immediately before closing of the JBS transaction, Smithfield Beef will acquire from CGC the 50 percent of Five Rivers that it does not presently own in return for 2.167 million shares of Smithfield common stock.
The transaction excludes live cattle inventories held by Smithfield Beef and Five Rivers as of the closing date, together with associated debt. Smithfield believes that most of the live cattle inventories will be sold within six months after closing with substantially all sold within 12 months after closing.
Smithfield Foods is expected to use the money from the transaction to reduce its debt.
Smithfield Beef processes approximately 1.5 billion pounds of fresh beef annually. Its processing capacity is 7,600 cattle per day. Five Rivers is the largest cattle feedlot operation in the U.S. with a one-time feeding capacity of 811,000 head of cattle.
"We see this acquisition as an opportunity to participate in a segment of the business and a region where we are not present today. The synergy created will help us increase our customer-base and reduce overheads in a highly competitive industry," said Wesley Mendonça Batista, chief executive of JBS USA.
The transaction is expected to close as soon as possible subject to customary regulatory review and closing conditions.
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