JBS, Marfrig detail benefits from Seara Brasil sale
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SÃO PAULO, Brazil – JBS S.A. is acquiring Seara Brasil, a local poultry producer owned by Marfrig Alimentos, the companies announced June 10. The deal is worth R$5.85 billion ($2.5 billion), and is subject to approval by regulatory authorities. The deal also includes the Zenda tannery unit in Uruguay. The purchase would see JBS, which had total debt of R$21.2 billion ($9.94 billion) at the end of last quarter, overtake Springdale, Ark.-based Tyson Foods Inc. as the top poultry producer globally.
“We are going to operate the largest chicken platform globally,” Wesley Batista, president and CEO of JBS S.A., said in a conference call this morning, “This is a strong strategic position for JBS. We believe we can add a lot of value with the addition of Seara.
“This unique opportunity fits with our strategy to grow our chicken and pork business and to further grow our processed products business,” Batista said. “JBS has a history of integration and we believe we have been integrating our business well over the years.”
The deal will allow Marfrig to rebalance its capital structure. Fitch Ratings downgraded Marfrig's debt rating June 6 and warned it would make additional downgrades because of Marfrig's debt load. Additionally, Marfrig plans to redirect its strategy for its foodservice segment and "strengthen its focus in Brazil on its Beef and Distribution business," the company said in a news release.
“This deal allows Marfrig the capacity to grow in years to come,” Sergio Rial, CEO of Seara Brasil, explained.” We remain committed to sustainable growth.”
JBS will receive a mix of long- and short-term debt, with 65 percent denominated in dollars and the rest in reais. For Marfrig, the deal means a cut in net debt that jumped sevenfold in the past five years to about 10 billion reais as of March 31.
Batista said there are no plans to sell bonds to fund the operation. The deal will provide JBS with Seara’s 30 production units in Brazil. The production includes 2.7 million birds and 17,000 hogs slaughtered daily and the production of 80,000 lbs. in further processed meats every month. Buying Seara also means JBS will take on Marfrig’s soccer World Cup sponsorship contract.
São Paulo, Brazil-based JBS, which is already the world's largest meat processor, will create the second largest processed meats portfolio in Brazil. JBS acquired the controlling stake in Greely, Colo.-based Pilgrim’s Pride Corp. in 2009.
Adding Seara’s 45,000 employees to JBS will push the company to 185,000 employees globally.