GREELEY, Colo. – During a July 2 conference call, JBS SA CEO Wesley Batista revealed that JBS USA Pork, a unit of the Sao Paulo, Brazil-based company, has been interested in purchasing Cargill’s US-pork based business for several years. The business was not for sale, but JBS’ offer of $1.45 billion was apparently too good for Cargill to pass up.
“For many years, we’ve demonstrated our interest in the Cargill business,” Batista said. “This transaction has a long history. This is a special day. We have been looking to expand our pork business for a long time.”
The acquisition, announced July 1, includes two Midwest pork-processing plants, one in Ottumwa, Iowa, and the other based in Beardstown, Ill. The agreement is subject to regulatory review and approval.
There are plenty of reasons JBS wanted to acquire the business, according to Jeremiah O‘Callaghan, director of investor relations for JBS. For starters, O‘Callaghan cited a strong demand of pork through 2021, noting that consumption and production is on target to increase 40 percent from 2000 to 2021. He also said the US is “uniquely positioned as the most competitive producer of pork,” and noted there’s “a substantial gap between the cost of pork production between the US and other countries.”
Batista said the acquisition also allows JBS, the world’s largest meatpacker, to grow its portfolio of prepared and value-added products.
“We already have a strong pork business, so putting the two businesses together is a perfect combination,” he added.
Andre Nogueira, CEO of JBS USA, said the company likes what it is getting in the deal, including $2.5 billion in annual net revenue – 81 percent in the US and 19 percent in exports.
Nogeuira noted that the acquired processing plants are in key areas geographically, calling their locations “the best place to grow and process hogs globally.”
Cargill acquired both plants in 1987. In 2014 the plants processed a combined 9.3 million hogs. JBS will also acquire five feed mills (two in Missouri, and one each in Arkansas, Iowa and Texas), and four hog farms (two in Arkansas and one each in Oklahoma and Texas) if the deal is approved.
In a press release issued by Cargill on Wednesday, Todd Hall, Cargill’s senior vice president, said the transaction promises “to offer enhanced service to customers and more opportunities for employees and hog producers while providing an important source of protein to consumers around the world.”
“The professional and focused manner in which JBS approached Cargill demonstrated to us that they place a great deal of value on growing this part of their company to better compete in the marketplace and are willing to invest in its future,” Hall added. “JBS is acquiring a business with excellent people and fixed assets, and an established track record of success.”
Batista said “cash and committed credit lines” will be used to fund the deal, which will make JBS the No. 2 pork processor in the US behind Smithfield when approved.