* JBS-Pilgrim's deal would create powerful No. 2 in U.S.
* Antitrust approval seen likely despite concentration
By Bob Burgdorfer and Diane Bartz
CHICAGO, Sept 3 Brazilian meat giant JBS
(JBSS3.SA) would likely get U.S. antitrust approval if it
decides to buy U.S. chicken producer Pilgrim's Pride PGPDQ.PK
even though the already concentrated American meat market would
lose yet another player.
While buying Pilgrim's Pride would give JBS USA $23.9
billion of sales, within striking distance of No. 1 Tyson with
$26.9 billion, the deal would not give JBS enough market power
in the chicken business to worry regulators, experts said.
Published reports on Wednesday said JBS is close to a deal
to buy Pilgrim's Pride for more than $2 billion. JBS denied it
was committed to any deal and Pilgrim's Pride had no comment.
JBS is already the third-largest beef producer, after Tyson
and Cargill, and the third-largest pork producer, after
Smithfield and Tyson. This deal would make it the
second-largest chicken producer, after Tyson, with about 18
percent of the market.
While this would seem to give it considerable clout in the
meat market and while consumers may reach for chicken if the
price of beef goes up, antitrust regulators think differently.
"Meat is not interchangeable. Beef is a market, pork is a
market, chicken is a market," said Andre Barlow, an antitrust
lawyer with Doyle Barlow and Mazard who believed the deal would
win approval by U.S. antitrust regulators.
John Briggs, an antitrust expert with the law firm Axinn
Veltrop Harkrider LLP, agreed. "I would be very surprised if
that ran into any serious antitrust scrutiny," he said.
Still, regulators could require selective divestiture in
areas where JBS is particularly strong, said Richard Brosnick,
a New York City-based antitrust attorney with Butzel Long.
"The exception is that there may be isolated markets. There
may be a pocket of the country that these distributors (JBS and
Pilgrim's Pride) have 60 or 70 percent of the meat market,"
PRICE SEEMS REASONABLE
The reported $2 billion-plus price that JBS would likely
pay for Pilgrim's Pride drew approving comments.
"They could pay off the bonds and the notes and even give
Bo (Pilgrim) a couple of million," said Paul Aho, an economist
with the consulting firm Poultry Perspective. Bo Pilgrim is
senior chairman of Pilgrim's Pride.
U.S. livestock and poultry industries have lost money this
past year, hurt by high feed and fuel prices and by slow meat
sales, said Ron Plain, University of Missouri agricultural
"There are a number of livestock and poultry firms that
have lost a lot of money and are ripe to buy," said Plain.
Pilgrim's Pride filed for bankruptcy in late 2008 because
of such pressures and as it was burdened by debt from its
purchase in late 2006 of Gold Kist Inc.
The idea of JBS, which is primarily a beef company, buying
a chicken company still has some people scratching their
"I'm surprised at this potential move by JBS because they
have always given the indication that they are going to focus
primarily on the beef industry," said Steve Kay, editor of
Cattle Buyers Weekly. "Buying an extremely large poultry
company would take them totally out of their comfort zone in
Pilgrim's Pride shares closed up 27 cents, or 5.24 percent,
at $5.42 in Pink Sheet trading. In Brazil, JBS shares were up
14 cents, or 1.8 percent, at $7.87
(Editing by Christian Wiessner and Steve Orlofsky)