Brazilian beef producer JBS SA is set to become the world's largest meat maker with two deals announced Wednesday, one that takes struggling Texas chicken producer Pilgrim's Pride Corp. out of bankruptcy protection.
JBS said it will buy a majority stake in Pilgrim's Pride for $800 million, in a deal that includes paying off Pilgrim's Pride's creditors in full and distributing new stock to current shareholders — something unusual for a company in bankruptcy protection.
The second deal involves a merger with Bertin SA, one of Latin America's largest producers and exporters of milk products, beef and leather, Brazil's stock regulatory commission confirmed Wednesday.
JBS said the newly minted JBS-Bertin will be the world's largest meat producer with an annual income of $28.7 billion, just edging out Springdale, Arkansas-based Tyson Foods Inc. It will have operations in North and South America, Africa, Europe, Russia, China and Australia.
Terms were not disclosed for the deal to buy Bertin.
Pittsburg, Texas-based Pilgrim's Pride will sell 64 percent of the stock in the reorganized company to JBS for $800 million in cash, implying a total company value of $1.25 billion. Existing shareholders will receive shares in the remaining 36 percent of Pilgrim's Pride worth $450 million. Including the plan to pay off $1.5 billion of current debt, the entire transaction is worth $2.8 billion, JBS said.
In addition, the plan calls for an exit financing of $1.75 billion, although spokesman Ray Atkinson said the company would not fully draw all of that.
Pilgrim's Pride was the nation's largest chicken producer with about 23 percent of the U.S. market before it filed for bankruptcy protection late last year. The company was hobbled by debt from its buyout of a competitor and by high feed costs that left much of the industry in a slump.
The sale, rumors of which surfaced earlier this month, gives JBS an entry in the U.S. poultry market. JBS already is a top producer of beef and pork in the U.S. and the world. With the deals announced Wednesday, it will be the largest beef producing company in Brazil, Australia, Argentina and Italy.
Pilgrim's Pride was attractive to JBS since chicken is a new market and Pilgrim's Pride had been the U.S. leader, said Doug Conn, managing director at Hexagon Securities in New York.
"They're heavily involved in beef and pork right now," he said. "This is a very strong move on their part to become a major provider of poultry in the U.S. and potentially abroad."
Pilgrim's Pride said the deal is subject to antitrust clearance. U.S. regulators earlier this year sued to block JBS' acquisition of a major beef producer, citing pricing concerns for consumers and producers. The $560 million deal with National Beef Packing Co. was later dropped.
Under terms of the plan, all creditors holding allowed claims will be paid in cash or by issuance of a new note. Pilgrim's Pride said if the U.S. bankruptcy court approves the deal, the company could emerge from court protection by December.
Pilgrim's Pride has trimmed its business in the past year by cutting production and idling plants so it could control costs and get out of bankruptcy protection. The slimmed-down company returned to profitability earlier this year and also benefited as ingredient costs moderated from record highs last summer.
Senior Chairman Lonnie "Bo" Pilgrim said the deal marks a new beginning for the company.
"While the past year has been a difficult time for everyone involved in our restructuring, I take pride in knowing that we have a plan in place to pay back our creditors in full and preserve a great deal of value for our existing stockholders," he said in a statement.
JBS USA Holdings CEO Wesley M. Batista said the company looks forward to entering the U.S. poultry market, expanding Pilgrim's poultry business and increasing the company's competitiveness around the world.
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AP Business Writer Mae Anderson contributed to this report from New York and Associated Press Writer Marco Sibaja contributed from Brasilia.