Greeley meatpacker JBS hopes to get into poultry business
For The Fence Post
The nation’s largest beef producer may become majority owner in the nation’s largest poultry producer.
JBS S.A., parent company of Greeley-based JBS USA, is paying $800 million in cash for 64 percent of Pilgrim’s Pride Corp., the companies said Wednesday. The overall transaction represents an enterprise value of $2.8 billion, and, if approved, would make JBS USA a major multi-protein rival to Tyson Foods Inc., currently the only major meat company in the U.S. to produce beef, pork and poultry.
The deal, which probably will face some government scrutiny, is expected to be finalized once Pilgrim’s Pride, based in Pittsburg, Texas, emerges from Chapter 11 bankruptcy protection, which it filed for about a year ago. The sale is part of its reorganization plan.
Steve Koontz, an agricultural economist at Colorado State University, said JBS was able to buy Pilgrim’s at a fire-sale price. The company was driven to bankruptcy, in part, because it could not hedge corn prices, the major feed for chickens, Koontz said.
“I’m just stunned a company that size cannot hedge corn, absolutely stunned,” Koontz said.
Both he and Steve Kay, publisher of Cattle Buyers Weekly, a beef industry trade publication, said JBS will bring that expertise to the table – and a lot more.
Koontz said with feed costs so high in the past year, there has been “a whole lot of shake-up” with a reduction of beef cows, pigs, chickens and dairy cattle. But that is starting to turn around and as a result, it was “just too good of a deal” for JBS to pass on.
“They (JBS) know what people in different countries like to eat, and obviously they know how to package product and move it,” Koontz said.
Kay agreed.
“This will get Pilgrim’s products into the global market, and at the same time, JBS can use Pilgrim’s distribution system to move more beef and pork,” Kay said, who still expressed surprise that the Brazilian company moved into the poultry business where it has no experience.
In a prepared statement, Pilgrim’s President and CEO Don Jackson said that proceeds from the sale of stock will be used to fund distributions to creditors in cash or new notes. Meanwhile, existing shareholders will own 36 percent of the reorganized firm.
“Thanks to the shared commitment and hard work of our employees, we believe that Pilgrim’s Pride is positioned to emerge from bankruptcy as a stronger, more efficient competitor,” Jackson said.
“We have returned to profitability, the quality of our asset base has improved significantly, and we are gaining additional business. While we recognize that some of the changes made during our restructuring have been painful for our employees and contract growers, these decisions were absolutely necessary in helping Pilgrim’s Pride to operate more efficiently while protecting the greatest number of jobs in the long term,” he said.
Two years ago, JBS S.A. bought Swift & Co., headquartered at Promontory in west Greeley, which was the South American company’s first venture into pork.
“We are proud to now enter into the U.S. poultry industry with the acquisition of Pilgrim’s Pride,” JBS USA CEO Wesley Batista said in a prepared statement.
“We look forward to working with Pilgrim’s management to increase the company’s competitiveness both domestically and internationally. As we have accomplished with our beef and pork platforms, we will utilize our existing assets and strong management to grow Pilgrim’s poultry business,” he said.
Koontz and Kay said they thought JBS USA may move a few, but not many, Pilgrim’s Pride executives to the Greeley headquarters, particularly those involved in feeding operations. But most will stay where the chickens are, Koontz added.
Both also doubted the U.S. government would oppose the purchase vigorously, as it did when JBS bought the beef division of Smithfield Foods and attempted to buy National Beef, which was dropped when the U.S. Department of Justice intervened.
While some Smithfield people were moved to Greeley earlier this year, Kay said JBS will probably look at what happened when Tyson bought Iowa Beef Packers and merged those executives with Tyson.
“It never really worked out … and by 2006 of lot of them (IBP) moved back to where they were,” Kay said.
Koontz said the government will probably give the sale a cursory glance.
“This is different in that the competition is Tyson,” Koontz said. Kay added JBS was probably the only company that could buy into Pilgrim’s, as the government would have vetoed a Tyson purchase in a heartbeat.
Chandler Keys, JBS USA spokesman, said the latest moves by the Brazilian company is an extension of its goal when it bought Swift & Co.
“They said then they intended to grow, and they’ve been aggressive in doing that. This is one more example of their commitment to the economy of the United States,” he said. Keys said management of the two companies will be worked out between Batista and Jackson.
The nation’s largest beef producer may become majority owner in the nation’s largest poultry producer.
JBS S.A., parent company of Greeley-based JBS USA, is paying $800 million in cash for 64 percent of Pilgrim’s Pride Corp., the companies said Wednesday. The overall transaction represents an enterprise value of $2.8 billion, and, if approved, would make JBS USA a major multi-protein rival to Tyson Foods Inc., currently the only major meat company in the U.S. to produce beef, pork and poultry.
The deal, which probably will face some government scrutiny, is expected to be finalized once Pilgrim’s Pride, based in Pittsburg, Texas, emerges from Chapter 11 bankruptcy protection, which it filed for about a year ago. The sale is part of its reorganization plan.
Steve Koontz, an agricultural economist at Colorado State University, said JBS was able to buy Pilgrim’s at a fire-sale price. The company was driven to bankruptcy, in part, because it could not hedge corn prices, the major feed for chickens, Koontz said.
“I’m just stunned a company that size cannot hedge corn, absolutely stunned,” Koontz said.
Both he and Steve Kay, publisher of Cattle Buyers Weekly, a beef industry trade publication, said JBS will bring that expertise to the table – and a lot more.
Koontz said with feed costs so high in the past year, there has been “a whole lot of shake-up” with a reduction of beef cows, pigs, chickens and dairy cattle. But that is starting to turn around and as a result, it was “just too good of a deal” for JBS to pass on.
“They (JBS) know what people in different countries like to eat, and obviously they know how to package product and move it,” Koontz said.
Kay agreed.
“This will get Pilgrim’s products into the global market, and at the same time, JBS can use Pilgrim’s distribution system to move more beef and pork,” Kay said, who still expressed surprise that the Brazilian company moved into the poultry business where it has no experience.
In a prepared statement, Pilgrim’s President and CEO Don Jackson said that proceeds from the sale of stock will be used to fund distributions to creditors in cash or new notes. Meanwhile, existing shareholders will own 36 percent of the reorganized firm.
“Thanks to the shared commitment and hard work of our employees, we believe that Pilgrim’s Pride is positioned to emerge from bankruptcy as a stronger, more efficient competitor,” Jackson said.
“We have returned to profitability, the quality of our asset base has improved significantly, and we are gaining additional business. While we recognize that some of the changes made during our restructuring have been painful for our employees and contract growers, these decisions were absolutely necessary in helping Pilgrim’s Pride to operate more efficiently while protecting the greatest number of jobs in the long term,” he said.
Two years ago, JBS S.A. bought Swift & Co., headquartered at Promontory in west Greeley, which was the South American company’s first venture into pork.
“We are proud to now enter into the U.S. poultry industry with the acquisition of Pilgrim’s Pride,” JBS USA CEO Wesley Batista said in a prepared statement.
“We look forward to working with Pilgrim’s management to increase the company’s competitiveness both domestically and internationally. As we have accomplished with our beef and pork platforms, we will utilize our existing assets and strong management to grow Pilgrim’s poultry business,” he said.
Koontz and Kay said they thought JBS USA may move a few, but not many, Pilgrim’s Pride executives to the Greeley headquarters, particularly those involved in feeding operations. But most will stay where the chickens are, Koontz added.
Both also doubted the U.S. government would oppose the purchase vigorously, as it did when JBS bought the beef division of Smithfield Foods and attempted to buy National Beef, which was dropped when the U.S. Department of Justice intervened.
While some Smithfield people were moved to Greeley earlier this year, Kay said JBS will probably look at what happened when Tyson bought Iowa Beef Packers and merged those executives with Tyson.
“It never really worked out … and by 2006 of lot of them (IBP) moved back to where they were,” Kay said.
Koontz said the government will probably give the sale a cursory glance.
“This is different in that the competition is Tyson,” Koontz said. Kay added JBS was probably the only company that could buy into Pilgrim’s, as the government would have vetoed a Tyson purchase in a heartbeat.
Chandler Keys, JBS USA spokesman, said the latest moves by the Brazilian company is an extension of its goal when it bought Swift & Co.
“They said then they intended to grow, and they’ve been aggressive in doing that. This is one more example of their commitment to the economy of the United States,” he said. Keys said management of the two companies will be worked out between Batista and Jackson.
