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Commodities

Brazil's JBS to reorganize business to speed up global expansion

SAO PAULO (Reuters) - JBS SA proposed on Wednesday a thorough corporate reorganization entailing the creation of a company grouping international operations outside Brazil, the latest step by the world’s largest meatpacker to develop into a global food player.

Under terms of the plan, São Paulo-based JBS SA will create JBS Foods International, an Ireland-based company whose assets will encompass global operations and those of Brazil-based food processor Seara Alimentos, Chief Executive Officer Wesley Batista said in an interview.

The plan, which calls for JBS Foods International to be listed in New York, requires shareholder and regulatory approval, and could be finalized by November, he said. The group’s business will continue to be run from Brazil, he added.

The decision comes a decade after Wesley and his brother Joesley Batista embarked on a $19 billion global takeover spree that saw the once-tiny slaughterhouse in Brazil’s center-west savanna gobble up rivals in the United States, South America, Europe and Australia. The Batistas control about 45 percent of JBS through a family investment vehicle.

“We see ourselves as a global food company that was born in Brazil and that’s the way we want to be seen: as a global player,” Wesley Batista said at his São Paulo office.

The transaction makes JBS the first Brazilian multinational with a clear division of local and global assets, underscoring the Batistas’ long wish of creating a platform to facilitate faster growth, cut fundraising costs, optimize taxation and cater to a wider base of investors.

JBS Foods International will be born with a base of assets spanning from Argentina and the United States to the United Kingdom and Australia with $35 billion in annual revenue and employing 115,000 people in more than four continents.

Currently, JBS SA earns over 80 percent of annual revenue in U.S. dollars and employs over 240,000 people worldwide. The new JBS SA will have about 30 billion reais ($8.7 billion) in annual revenues and about 125,000 employees.

DISCUSSIONS

Shares of JBS closed down 2.5 percent at 8.71 reais on Wednesday in São Paulo. The shares are down 24 percent this year.

The five Batista siblings control JBS through investment holding vehicle J&F Investimentos SA, which in turn has interests in pulp, finance and consumer products.

The company hired the investment-banking units of Morgan Stanley & Co and Banco Santander Brasil SA to structure the deal, aided by legal advisers White & Case LLP and Mattos Filho Advogados, Batista said.

According to Batista, the company’s management and his family have discussed a revamping of JBS’s corporate structure for over a year. The share swap will entail a ratio that will be decided once the asset split is announced, Batista said, adding that the transaction will be conducted “regardless of how market conditions are.”

Under terms of the plan, JBS SA will offer minority shareholders swapping their shares for those of JBS Foods International, with the exchange being subject to an issuance and a condition to maintain the minimum 25 percent free-float threshold for JBS SA in the São Paulo Stock Exchange.

The reorganization plan comes at a time when JBS has fallen under increased scrutiny from prosecutors and government auditors for allegedly providing Brazil’s ruling Workers Party with illegal donations in the 2014 presidential campaign. JBS denied making any undeclared donations to the party known as PT.

Asked whether such allegations could hamper the transaction, Batista said the investors are “less and less worried with that issue by the day.”

Senators are expected to suspend President Dilma Rousseff from office later on Wednesday pending her trial on allegations that she breached budgetary rules.

($1 = 3.4504 Brazilian reais)

Editing by Daniel Flynn, Bernard Orr

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