JBS, raising cash to help pay a R$10.3bn fine, sold European poultry producer Moy Park in a deal which will keep the business within the Brazilian meat giant's empire – with a sale to the Pilgrim's Pride group it controls.
JBS has agreed to sell Moy Park - which claims a 25% share of the western European chicken market - for an enterprise value of $1.3bn, with the equity interest valued at $1.0bn, and the balance comprising the likes of borrowings.
The deal follows an announcement in June of the potential sale of Moy Park, amid a drive by JBS to sell assets to help its holding company, J&F Investimentos, pay a hefty fine agreed after executives became entangled in bribery scandal implicating some senior Brazilian politicians and businesspeople.
But Monday's sale keeps Moy Park within the empire of JBS, which owns 78.6% of Pilgrim's Pride, and appoints a number of directors to the US-based group's board, including chairman Gilberto Tomazoni.
Other groups reported to have expressed interest in buying Moy Park include China's WH Group, which bought pork giant Smithfield Foods four years ago, private equity group CapVest Partners, whose investments include Stockholm-based poultry group Scandi Standard, and commodities giant Louis Dreyfus.
However, Pilgrim's Pride said that it had agreed the Moy Park purchase in a vote made by a special committee of three directors "unaffiliated with JBS".
"The special committee was delegated the full authority of the Pilgrim's board of directors with respect to the transaction," Pilgrim's Pride said.
Michael Cooper, the committee's chairman, said that its, unanimous, decision to back the takeover followed a "comprehensive review" of the deal, including on topics such as valuation and strategic benefit, with the acquisition viewed as being "in the best interests of Pilgrim's and its shareholders".
JBS, in a separate statement, said that the deal would allow it to "create a more efficient corporate structure" and to "maintain a strong financial performance… that further supports its intention to seek a public listing" in the US.
JBS chief executive Wesley Batista last month restated plans by the group for the flotation of a US-based division, JBS Foods International, with a listing potentially by the close of 2018.
Bill Lovette, the Pilgrim's Pride chief executive, said that the purchase of Moy Park - processes more than 5.7 million birds per week and has 13 processing plants located in the UK, Ireland, France and the Netherlands - would "position Pilgrim's to become a global player".
After the deal, Pilgrim's Pride, which currently operates in the US and Mexico, will see Europe account for 19% of group sales, of some $1.2bn.
"The acquisition gives us access to the attractive UK and European markets, which advances our strategy of diversifying our portfolio to be more global while reducing volatility across our businesses," Mr Lovette said.
Janet McCollum, the Moy Park chief executive, terming the acquisition a "positive development" for the UK-based group, said that "joining Pilgrim's gives us the opportunity to accelerate our growth plans, share best practices and leverage Pilgrim's expertise.
Moy Park in turn "will provide Pilgrim's with a platform for growth in Europe as well as access to innovation and increased exposure to prepared foods", Ms McCollum said.
Pilgrim's Pride said it was paying for the deal, which valued Moy Park at 7.1 times ebitda for the past 12 months, through a mixture of cash, credit facilities and a $737m note from JBS, which would be superceded by alternative financing.
Pilgrim's Pride's leverage would rise from 1.1 times ebitda, as of the end of June, to 2 times as of the time of the deal's closing.
Shares in the group fell by 2.2% to $28.47 in morning deals in New York, although remaining within range of their record high of $29.86 reached last week.
In Sao Paulo, JBS shares stood up 1.0% at R$8.27.
By Mike Verdin