JBS-National deal is off

by MEAT&POULTRY Staff
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KANSAS CITY, MO. – The acquisition that would have concentrated much of the U.S. beef industry into three rather than four companies is off. In an announcement issued this morning, National Beef and its majority owner, U.S. Premium Beef (USPB), stated that the proposed acquisition of National by JBS-Swift had been terminated, effective next Monday, Feb. 23. "[A]lthough this is not the outcome we anticipated, we are excited to continue the growth and success of our business on a stand-alone basis," stated Steve Hunt, USPB’s CEO, in the announcement.

According to Chandler Keys, director of government and industry relations for JBS-Swift, the deal fell apart when JBS could not reach an agreement with the U.S. Department of Justice, which had been investigating the proposed acquisition for several months for potential antitrust issues. "Everything revolved around the Justice Department. The bottom line was that we just couldn’t meet their parameters," he told MEATPOULTRY.com.

Simon McGee, vice president of corporate strategy and acquisitions at USPB, agreed. "It was really the Justice Department. JBS had been working to meet their concerns and just couldn’t satisfy them."

Mr. Keys said there wasn’t a single meeting or conversation between the parties that caused the deal’s termination. "It was an accumulation over time. Sometimes you get a momentum going the right way and sometimes you get it going the wrong way, and when it goes the wrong way eventually you reach a tipping point," he commented.

"None of us had to do this," Steve Hunt told MEATPOULTRY.com. "It was a strategic decision to terminate the acquisition." Mr. Hunt added, however, that "strategically, there were a lot of good things about the deal."

If the acquisition had been approved by the Justice Department, it would have made JBS the largest beef company in North America as well as in the world, followed by Tyson’s IBP division and Cargill’s Excel unit. Antitrust concerns from the federal government about concentration in the meat industry have a long history, dating back to the 1920s when successful antitrust efforts forced the so-called "Big Five" meatpackers in Chicago to give up their non-meat interests in railroads and other businesses. More recently, the Justice Department has been concerned about concentration among beef packers going back to the 1980s. For more than 20 years the beef industry has been dominated by four packing companies which together control more than 80 percent of the beef slaughter capacity in the U.S.

Mr. Keys said the cancellation of the acquisition leaves JBS "in a good liquidity position, which is hard to come by these days." He added that JBS’s May 2007 acquisition of Swift & Co. and its March 2008 purchase of the beef operations of Smithfield Foods "gave us a tremendous platform from which to operate. JBS and the Batista family remain totally committed to the U.S. beef industry."

Mr. McGee told MEATPOULTRY.com that over the months that the JBS acquisition was in the works, "it was pretty much business as usual" at USPB and National Beef. "We never lost focus on what we’re all about. It was and still is an exciting company to work for."

Mr. Hunt said that even with the distraction of an impending acquisition by JBS, USPB and National "still had a record year, so we’re excited to move forward on a stand-alone basis."

In the release issued this morning, John Miller, chief executive of National Beef, stated that "this development has re-energized our management team. With our strong liquidity position and numerous opportunities to grow our business – both internally and externally – we are eagerly looking forward to building on our value-added model while continuing to focus on serving the needs of our customers."

JBS-Swift is the North American division of JBS S.A., headquarters in Brazil, is the world’s largest beef exporter, operating 64 plants worldwide with a daily slaughter capacity of 65,200 head. JBS is also the third-largest pork processor in the U.S.

USPB brings together more than 2,100 producers from 36 states to market cattle on the company’s quality-based grids. These cattle "are the foundation of National Beef’s value-added product lines and have enabled it to be a leader in branded product programs for both domestic and international markets," according to USPB. National Beef, headquartered in Kansas City, Mo., has operations in Liberal, Dodge City and Kansas City, Kan.; Brawley, California; Hummels Wharf, Pa.; and Moultrie, Ga. The company processes and markets fresh beef, case-ready beef and beef by-products for domestic and international markets.

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