U.S. sues to block JBS from acquiring National Beef
- United States
- 10/23/2008
U.S. antitrust enforcers and 13 states sued to prevent Brazil’s JBS SA from acquiring National Beef Packing Co., saying the company would have too much control over the $30 billion cattle market and retail meat prices.
The acquisition of National Beef for $560 million in cash and stock would “complete a fundamental restructuring” of the U.S. beef-packing industry and give Sao Paulo-based JBS as much as 35 percent of total capacity, the Justice Department said in a statement today. Separately, the government said it will allow JBS to take over the beef-packing unit of Smithfield Foods Inc.
“The combination of JBS and National will likely lead to grocers, food-service companies and ultimately American consumers paying higher prices for beef,” Thomas O. Barnett, the Justice Department’s antitrust chief, said in a statement.
JBS, which bought Greeley, Colorado-based Swift & Co. for $225 million last year, was set to become the top beef producer in the U.S. with the proposed acquisition of National Beef, the Smithfield unit and Tasman Group of Australia for about $1.27 billion. The transactions would have given JBS control of one- tenth of the world’s beef processing.
Completion of the deals would put 80 percent of domestic- fed beef-cattle capacity in the hands of just three companies, JBS, Tyson Foods Inc. and Cargill Inc., the Justice Department said. In 2007, U.S. meatpackers purchased 27 million head of cattle valued at about $30 billion, with nearly 24 million purchased by the three biggest processors, the department said.
Will Fight Lawsuit
U.S. Premium Beef LLC, the majority owner of National Beef, said in a statement that it plans to “vigorously contest” the antitrust suit, which the government filed in U.S. District Court in Chicago.
“We are disappointed that the DOJ does not recognize that this transaction is pro competitive,” U.S. Premium Beef Chief Executive Officer Steve Hunt said in the statement. “We plan to vigorously contest the DOJ’s attempt to block it.”
Vanessa Esteves, a spokeswoman for JBS, declined to comment when contacted by Bloomberg News.
JBS has acquired 31 companies since 1993. The latest were in March, when the company agreed to buy the Smithfield unit, including cattle feedlots, for $565 million in cash; Kansas City-based National Beef for $465 million in cash and $95 million of stock; and Tasman Group in Australia for A$160 million ($148 million) in cash.
Adding National Beef’s two beef-packing plants in Liberal and Dodge City, Kansas, and one in Brawley, California, would give JBS the capacity to slaughter more than 40,000 cattle a day.
Debt Grade, Shares
Moody’s Investors Service last month said it may cut JBS’s debt rating on concern the acquisitions would reduce the company’s ability to generate cash to pay debts.
JBS rose 28 centavos, or 10 percent, to 3.08 reais today in Sao Paulo trading. The shares are down 57 percent in the past year, compared with a 35 percent drop in the Sao Paulo stock exchange’s Bovespa index.
