Regulators May Have a Beef with JBS Deal
Plans by JBS SA, a major global meatpacker based in Brazil, to spend about $1.2 billion in cash and stock to acquire two U.S. beef businesses are so audacious that they seem almost intent on drawing the close attention of federal regulators
The deals are almost certain to draw regulatory scrutiny since they would create the nation's largest processor of beef in the hands of a foreign corporation. In many ways, JBS could not have picked a worse time, politically speaking. With the economy sinking, the dollar falling, and election-year protectionist sentiment seeping through Washington, regulators might have more reason than ever to look askance at a foreign company that appears intent on cornering the American beef market. Add to that, of course, the rising fears about meat safety in the wake of last month's massive meat recall, the largest in U.S. history, at California's Hallmark/Westland Meat Packing.
TheDeal.com reported this week on the likelihood of close federal scrutiny of the deals. According to that publication, the acquisitions would put JBS in control of nearly a third of the American beef market. The targets are National Beef Packing, for which JBS has offered $560 million, and the beef operations of Smithfield Foods, for which the company wants to pay $565 million.
Together with JBS' acquisition last year of Swift & Co., the deals would combine the nation's third-, fourth-, and fifth-largest beef processors. Even before the deals, JBS is the world's largest producer of beef, with about $12 billion in annual sales.
The proposed deals did not come as a shock to Steve Cornett, who writes the Beef Today blog for AgWeb.com. "Neither of these buys came as a surprise to anybody with his ear to the ground," he wrote. "But both at once? That is, what? Flamboyant?"
JBS is on a global acquisition tear. In December, it spent $342 million for a a 50 percent stake in Inalca, an Italian beef processor. It paid $1.5 billion for Swift last July.
The falling dollar may have politicians and regulators in Washington wary about such acquisitions, but it also no doubt is a major factor behind JBS' decision to pounce â€" the Brazilian currency is up by more than 25 percent against the dollar over the past year.