Brazil's JBS mulls delaying IPO of international unit: sources

SAO PAULO (Reuters) - JBS SA JBSS3.SA, the world's largest meat processor, may postpone the New York listing of a global food processing unit originally expected for the second quarter because of lukewarm investor feedback after a scandal in Brazil, two people with knowledge of the situation said.

General view of Brazilian meatpacker JBS SA in the city of Lapa, Parana state, Brazil, March 21, 2017. REUTERS/Ueslei Marcelino

Executives at São Paulo-based JBS were worried about the impact that the probe into alleged bribery of Brazilian health officials had on investors, the sources said.

In the “Weak Flesh” probe, federal police accused JBS and dozens of peers of paying inspectors to overlook food safety procedures and 59 people have been charged with crimes.

The investigation caused several countries to ban imports of Brazilian meat for about a week. JBS has repeatedly denied any wrongdoing and insisted there that there was no problem with product quality.

The scandal broke weeks before JBS was due to launch the initial public offering of JBS Foods International BV, which could raise about $1 billion and help accelerate expansion outside Brazil.

The IPO could be put on hold until the impact of the probe on JBS Foods International can be better gauged, one source said. JBS has kept Barclays Plc BARC.L as a leading underwriter for the transaction and could engage more banks once the company sets a new time frame for the offering, the sources said.

One of the sources said waiting could be beneficial to the IPO’s potential pricing. The media office of JBS declined to comment.

JBS shares JBSS3.SA rose 3.6 percent on Wednesday, to 11.45 reais, turning previous year-to-date loss into a 0.32 percent rise.

The delay is another blow in JBS’s efforts to implement a reorganization plan aimed at transforming it into a global food processor. The JBS Foods International IPO plan was announced last December.

Previously, JBS was forced to scrap a plan to relocate international operations to Ireland after the investment arm of Brazil’s state development bank BNDES balked at it. Over two-thirds of JBS’ revenue come from operations outside Brazil.

Reuters reported on March 22, days after the investigation was launched, that JBS would press ahead with the IPO while seeking to shore up investor confidence with a campaign arguing the police probe misstated facts.

At the time, JBS or its advisers saw no pushback from potential investors.

Since then, JBS has resumed slaughtering at most of the 10 beef processing units that were shut down in the wake of the Weak Flesh probe.

Editing by Guillermo Parra-Bernal and Lisa Shumaker