Sector News

Brazil's JBS and controlling family hire Bradesco for asset sale plan – sources

May 24, 2017
Food & Drink

Brazil’s JBS SA and its controlling shareholders, facing financial fallout from a corruption scandal, have hired Banco Bradesco SA’s investment banking unit to work on a plan to sell several assets, three people with direct knowledge of the situation said on Tuesday.

Members of the billionaire Batista family, which owns about 42 percent of JBS, are looking for ways to raise cash after prosecutors demanded they pay an 11 billion-reais (2.6 billion pounds) fine to settle allegations they bribed scores of politicians, one of the people said.

The bribery allegations and related probes have spooked investors in JBS, which has 17.9 billion reais in short-term debt, cutting its share value by a third.

The scandal, which has led to calls for the resignation of Brazilian President Michel Temer, has laid bare the Batistas’ cozy relationship with some of the country’s most powerful politicians whom they admitted to bribing to obtain cheap government financing and other favours.

While the Batistas initially rejected the size of the proposed fine, it looks unlikely to be significantly reduced, pushing their holding company J&F Investimentos SA to consider divestitures to raise cash to pay for it, said the same person, who requested anonymity because the asset sale plan remains private.

J&F Investimentos denied having hired Bradesco or any other bank to sell assets. JBS and Bradesco did not respond immediately to requests for comment.

The Batistas had considered selling dairy company Fábrica de Produtos Alimentícios Vigor SA and sportswear and shoemaker Alpargatas SA – both owned by the family’s main investment holding vehicle – earlier this year, the people said. J&F had mandated Bradesco back then to help decide the fate of both assets, the people added.

After a brief interruption, the mandate was resumed to help the Batistas restructure their holdings, the people added. Bradesco, a major lender to JBS, has also been asked to seek buyers for assets such as food brands inside and outside Brazil, two of the people said, without elaborating.

One of the people said Alpargatas, maker of Havaianas flip flops, which J&F acquired from construction conglomerate Camargo Correa SA two-and-a-half years ago for 2.7 billion reais, could now be worth more than 3 billion reais.

The situation underscores the challenges facing the Batistas, who transformed JBS from a primarily Brazilian company into a global behemoth that operates in four continents in less than a decade, with the help of low-cost government loans.

In a securities filing late on Tuesday, Alpargatas said Joesley Batista and Chairman Vincent Trius had resigned from its board.

The company also said its controlling shareholder J&F had scrapped a plan to merge Alpargatas’ both classes of stock after complaints from minority investors against the ratio offered to exchange preferred shares for common shares.

Moves such as this have in the past been the prelude to an asset sale.

Preferred shares of Alpargatas, the company’s most widely traded class of stock, jumped 3.9 percent on Tuesday, its biggest one-day gain since April 25.

By Tatiana Bautzer and Guillermo Parra-Bernal

Source: Reuters

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