March 5, 2008 / 2:55 AM / 12 years ago

Brazil's JBS to buy U.S beef company

SAO PAULO (Reuters) - JBS (JBSS3.SA), the world’s biggest beef producer, said on Tuesday it had struck deals to buy two U.S. companies, Smithfield Beef Group and National Beef Packing Co, as well as Australia’s Tasman Group, for a total of nearly $1.3 billion.

JBS currently owns JBS-Swift in the United States, and Tuesday’s deal will make Swift the largest U.S. beef producer, surpassing Tyson Foods Inc (TSN.N), industry sources said.

The Brazilian company said it would issue 2.55 billion reais ($1.5 billion) in stock to raise money for the takeovers in a private subscription.

As part of its “globalization strategy,” JBS S.A. said in a statement it would pay $565 million for Smithfield, including its Five Rivers Ranch cattle feedlots subsidiary; $560 million for National Beef; and $150 million for Tasman.

The acquisitions of Tasman and Smithfield will be paid for in cash, while the National Beef deal involves payment of $465 million in cash and about $95 million in JBS shares.

JBS will issue stocks to finance the acquisitions at 7.07 reais a share, it said in a separate statement.

It said the acquisitions represented important steps “in the completion of the investment plan aimed at building a sustainable platform of slaughtering capacity and meat sales in the United States and Australia.”

In the United States, National Beef is the fourth-largest beef company and Smithfield is fifth, according to industry statistics.

The purchases will likely prompt scrutiny by the U.S. Justice Department amid concerns it could give JBS-Swift too much control of the U.S. beef market, said Jim Robb, economist with the Livestock Marketing Information Center.

“It makes them the biggest by about 8,000 head (of cattle) a day,” said Robb. “That will certainly raise questions with the Department of Justice.”

Tyson Foods Inc, the largest U.S. beef producer, has about 30 percent of the U.S. market, industry sources say.

Rumors that JBS-Swift would buy National Beef have been circulating in U.S. beef markets for some time.

Smithfield Foods Inc, which is also the largest U.S. hog and pork producer, has said it has been re-evaluating its beef operations because its beef plants were not located near its feedlots.

Five Rivers Ranch is the nation’s largest cattle feeding operation, which Smithfield jointly owns with ContiGroup Companies.

National Beef President Tim M. Klein will become President and chief operating officer of the joint National Beef/JBS-Swift beef operations.

“JBS’s worldwide reach and its reputation for efficient operations will enable National Beef to participate in opportunities heretofore unavailable to us,” John R. Miller, chief executive of National Beef, said in a statement.

National Beef has three slaughter plants and two meat processing units. Australia’s Tasman has six slaughter facilities, dealing in beef and small cattle.

Smithfield’s beef group is based in Green Bay, Wisconsin. and has four beef plants, which can process about 2 million cattle a year and more than $2.5 billion in annual sales.

($1=1.69 reais)

(Additional reporting Bob Burgdorfer, Chicago)

Reporting by Mauricio Savarese, writing by Andrei Khalip, editing by Jacqueline Wong

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