Sector News

JBS to purchase U.S. Cargill pork assets for $1.45 billion

July 2, 2015
Food & Drink
JBS SA, the world’s largest meat packer, is buying Cargill Inc’s U.S. pork business for $1.45 billion, free of debt, it said in a statement on Wednesday, a deal that would make it one of the largest and most powerful meat companies in the United States.
 
The bid by the company’s JBS USA subsidiary comes just over a week after Brazil-based JBS (JBSS3.SA) said it would buy Moy Park Ltd, the British unit of rival Marfrig Global Foods SA (MRFG3.SA) and marks the latest sign of consolidation in the U.S. protein sector.
 
Last month, dairy cooperative Land O’Lakes Inc. and United Suppliers Inc. said they would merge their crops inputs units, spawning a business ­group with more than $7 billion in annual sales. In 2013, U.S. pork powerhouse Smithfield Foods Inc merged with Shuanghui International of China in a $4.7 billion deal.
 
Like the Shuanghui-Smithfield deal, approval of the Cargill sale could hinge on whether U.S. federal regulators look at just the pork unit, or JBS’ entire meat business, said Jim Robb, analyst at the Livestock Marketing Information Center.
 
Industry data puts JBS USA as controlling about 22 percent of the U.S. beef market, and about 18 percent of the U.S. poultry market, the second largest player in both sectors behind Tyson Foods Inc. (TSN.N).
 
The deal announced on Wednesday includes two meat processing plants in Iowa and Illinois, as well as five feed mills in Missouri, Arkansas, Iowa and Texas and four hog farms in Arkansas, Oklahoma and Texas.
 
If all protein sectors are included, the U.S. Department of Justice could find that the company would have too large a slice of the U.S. meat market: JBS USA touts itself as a leading processor of beef, pork and lamb, in addition to being a majority shareholder in chicken processor Pilgrim’s Pride Corp.
 
“It depends on how (the U.S. government) cuts it up,” Robb said. “JBS has relatively small holdings on the hog side, but Cargill has relatively large holdings.”
 
STRATEGIC GROWTH
 
JBS said its latest purchase was in line with its strategy to “grow its portfolio of prepared and value-added products, expanding the company’s customer base.”
 
JBS, which grew from a family-run butcher to become Brazil’s largest company by revenue, purchased Australian processed foods maker Primo Smallgoods in November in order to increase sales to Asia.
 
Cargill had not been looking to sell its pork business but “JBS approached us with an offer that we had to consider,” said spokesman Mike Martin, adding the company was sticking with its other animal protein businesses globally and would “evaluate opportunities that could provide long-term, profitable growth.”
 
News of the deal came a surprise to some industry watchers and U.S. farmers.
 
Cargill Meat Solutions, headquartered in Wichita, Kansas, had seemed to be trying to increase the ranks of farmers who produce hogs for the company, said Mike Paustian, an independent hog producer in Scott County, Iowa. He said he saw Cargill advertisements looking for pig growers.
 
“The impression that I had is they were looking for places to put pigs,” he said.
 
Still, the takeover should not impact independent producers much because a lot of Cargill’s supply comes from contract growers, said Paustian, who usually sells his hogs to Tyson Foods.
 
“A lot of what they were processing were their own hogs. They were pretty integrated. It’s not like you’re potentially losing a big market for us to sell our hogs to,” he said.
 
(Reporting by Caroline Stauffer and Guillermo Parra Bernal in Sao Paulo, and Tom Polansek, Michael Hirtzer and P.J. Huffstutter in Chicago.; Editing by Andrew Hay)

comments closed

Related News

May 21, 2022

Cécile Béliot becomes Bel Group CEO

Food & Drink

Cécile Béliot has assumed the role of Bel Group chief executive officer, following the decision to separate the roles of chairman and CEO. The separation of the functions will enable Bel Group to develop in three areas of healthy snacking. Meanwhile, the company’s former CEO, Antoine Fiévet, has had his mandate renewed as chairman of the board.

May 21, 2022

“Corporate greed and dereliction of duty”: FDA commissioner slammed over infant formula shortage

Food & Drink

US Food and Drug Administration (FDA) Commissioner Dr. Robert Califf was grilled by lawmakers during a House Appropriations subcommittee hearing, where he was slammed over the agency’s handling of the escalating infant formula shortage.

May 21, 2022

Sweegen hails antioxidants and bitter blocking tech a turning point for sugar reduction and healthy aging

Food & Drink

Sweegen is ramping up its efforts to reduce sugar across F&B applications while simultaneously tapping into the benefits of using antioxidants and bitter blocking technology. Speaking to FoodIngredientsFirst, Casey McCormick, vice president of global innovation at Sweegen, says product developers can find a broad range of solutions in Sweegen’s nature-based sweetener systems as brands elevate better-for-you foods.