(Reuters) – Brazil’s JBS SA (JBSS3.SA), the world’s largest beef exporter, said on Friday its $1.25 billion purchase of Australian processed foods producer Primo Smallgoods would increase its presence in Asia.
JBS hopes to increase sales to South Korea, Singapore, Hong Kong and China, where it is already the biggest protein supplier, Chief Executive Officer Wesley Batista said on a conference call.
“Acquisitions have been a tremendous strategy for JBS,” Chief Executive Officer Wesley Batista said on a conference call. “The main benefit of this operation is probably to serve the Asian market.”
The company, which began as a small family-run business in Brazil, also announced late on Thursday that it was buying AMSE02 Participações, which controls Grupo Big Frango in southern Brazil, for 430 million reais ($165 million).
Primo Smallgoods is a leading producer of ham, sausage and bacon in Australia and New Zealand, with five plants, seven distribution centers and 30 stores.
JBS expects to reap 30 million Australian dollars in cost savings from the deal and expects revenue of 1 billion Australian dollars from it in 2015. The purchase still needs approval of Australian regulators.
Batista said the acquisitions would temporarily increase leverage slightly but that JBS expected to end the year with about the same ratio of debt to earnings before interest, taxes, depreciation and amortization it has now.
JBS has cash available to make the acquisitions, but it would probably still tap markets to improve its capital structure, he added. He did not say what kind of instrument JBS might be looking at.
Batista said earlier this month that the company’s exports of animal protein products from its Australian unit to China were growing and should keep doing so. China and Australia signed a free trade agreement this month.
JBS last week reported a five-fold increase in third-quarter net income from a year earlier and forecast a 22 percent rise in net revenue for 2014.
JBS shares rose 1.9 percent in Sao Paulo trading.
(Reporting by Caroline Stauffer, Roberto Samora and Marcela Ayres; Editing by Jane Merriman and Lisa Von Ahn)