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Brazil May Bid For Swift

Econ101

Well-known member
Brazilian beef company eyes Swift & Co.



Sharon Dunn

The Grreeley Tribune

April 14, 2007

Colorado, US



A Brazilian beef producer may be in the running to buy Greeley-based Swift & Co.



Steve Kay, publisher of Cattle Buyer's Weekly, a trade publication in California, said Friday that JBS S.A., an international exporter of fresh and processed beef based in Sao Paulo, Brazil, may be in the running to buy Swift.



The apparent asking price for Swift is in excess of $1.5 billion.



Swift & Co. owners, HM Capital Partners, put the company up for sale in January. In an earnings call this week, Swift president Sam Rovit said some movement on that end may be announced in May. Swift spokeman, Shawn McHugh, did not return calls for comment Friday.



Kay, who has followed Swift closely through the years, said his sources tell him that Swift could wrap up bidding on the global operation next week.



National Beef Packing Co., the fourth largest beef processor in the U.S., emerged early on as a potential buyer when Swift hired JP Morgan Chase to explore its options through either a sale, merger, partnership, refinancing or an initial public offering. National is still believed to be the highest bidder.



Kay said it's more likely that a global player will buy Swift, as opposed to it going public.



"They'd get a whole lot more (the company) through this than an IPO," Kay said. "I think the investment community in the last several years has made it clear they're not interested in the meat processing business. It has low margins, it's highly cyclical and full of risk."



Swift has had a rough couple of years, with Asian markets closing to U.S. beef and turning previously record profits at the company into double-digit losses. In December, just when the company began realizing some growth due to Japanese markets reopening months before, Swift was hit with an Immigrations and Customs Enforcement raid, halting operations at six plants across the nation. Swift officials estimate that one day alone cost the company $30 million.



In the downtime, however, Swift also operated in Australia, where profits increased regularly due to Asian markets being closed to the U.S. In the most recent earnings period, Swift Australia sales grew by 14 percent.



"Like the other entities that might have bid for Swift, I think any bidder sees this as a rather unique opportunity to pick up a large share of the beef and pork processing industry in the U.S. and the largest beef processor in Australia at the same time," Kay said. "It's conceivable that this Brazilian company truly has intentions to become a global leader in beef."



JBS operates 21 plants in Brazil and five plants in Argentina. The company, which is the largest beef producer in Latin America, is also considered a major player in the world market. It exports beef and beef byproducts to customers in more than 110 countries throughout the world. JBS also produces ready-to-eat meals. Its sales make it the sixth largest beef company in the world, Kay said.



"Acquiring Swift would make it by far the world's largest exporter of fresh beef," Kay reports in Cattle Buyer's Weekly.



According to a company press release, JBS is in expansion mode with plans to continue growth in its domestic and international markets. But it needs to overcome some adverse conditions -- financial and commercial -- before getting into the U.S., Canada, Mexico, South Korea and Japan, it reports.



Kay reports in Cattle Buyer's Weekly that JBS recently completed its own initial public offering, through which it raised about $775 million. That, along with other acquisitions in the past couple of years, would help it raise the cash necessary to buy Swift, he said.



At present, bidders are going through a "second bidding" in that they've initially met parameters laid out by Swift. Now, Kay said, bidders are going through what is called due-diligence, through which they inspect the books and the plants.



-- Tribune reporter Kelly Morgan contributed to this report.



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