Senators grill beef executive over deal
BY DAVID IRVIN
Posted on Thursday, May 8, 2008
The top manager of Brazilian-owned JBS-Swift and Co. faced tough questions Wednesday from U. S. senators over the company’s plan to buy two U. S. packers and a large cattle-feeding operation.
Sen. Herb Kohl, D-Wis., headed the meeting of the Senate Judiciary Committee, Subcommittee on Antitrust, Competition Policy and Consumer Rights, which was available over the Internet.
Kohl said U. S. Department of Justice antitrust measures have been weak in recent years, and he had concerns about what the JBS deal would do to competition.
“Millions of consumers are depending on aggressive antitrust enforcement, and now is not the time for antitrust enforcers to be asleep at the switch,” Kohl said.
At issue is whether JBSSwift, formed last year when JBS SA bought Colorado based Swift and Co., should be allowed to buy National Beef Packing Co. of Kansas City, Mo., and Virginia-based Smithfield Foods’ beef business.
Wesley Batista, the chief executive officer of JBS-Swift and Co., said during the meeting the deal would improve the performance of the U. S. beef industry.
“JBS now has a global operation that we plan to use as a platform to expand the sales of beef and pork around the world,” Batista said. “We will increase our demand and sales over time; this will benefit ranchers and feedlots.” Included in the deal is Five Rivers, a major feeding operation in Colorado, Idaho, Kansas, Oklahoma and Texas. Sen. Charles Grassley, R-Iowa, also on the subcommittee, said the deals will leave ranchers with “minimal selling options throughout large geographic areas.” If the full deal goes through, JBS-Swift will become the largest beef packer in the nation, supplanting Springdale-based Tyson Foods Inc.
JBS-Swift would have daily cattle slaughter capacity of about 43, 000 head, about 15, 000 more than Tyson. Grassley pointed out that JBS would control 32 percent of the domestic slaughter capacity.
The total value of the deals comes to about $ 1. 5 billion. Last year, JBS put up $ 225 million in cash and assumed $ 1. 2 billion in debt for Swift’s operations. If the current deals are approved, JBS will have invested nearly $ 3 billion in the U. S. beef business since last summer.
JBS sales will increase to $ 22 billion a year once the transactions are complete, compared with $ 12 billion, top JBS managers in Brazil said earlier this year.
The company has been aggressively buying slaughterhouses around the world for several years. Just last week, JBS completed a $ 150 million deal for Australian beef and sheep producer Tasman Group Ltd., according to Australian media reports.
Bill Bullard is chief executive officer of the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, which represents independent ranchers. At the hearing he argued that JBS-Swift’s desire to buy Five Rivers, the largest cluster of feedlots in the country, is troublesome.
“Under this merger, JBS will be in close proximity to all of those feedlots,” Bullard said. “JBS is going to be able to capture 2 million head and use those cattle strategically to keep from entering the competitive marketplace.” Batista said Five Rivers’ capacity is closer to 1. 4 million head a year, and the new company wouldn’t change how the feedlots are used. However, JBS would expand shifts and hire more workers, just as it did when it bought Swift and Co., he said.
Near the end of the two-hour meeting, Kohl asked whether the Brazilian government had subsidized JBS’ takeover bid in the United States.
Batista denied that the government had any hand in the deals. Colin Woodall, executive director of legislative affairs for the National Cattlemen’s Beef Association, a beef industry lobbyist, attended the Senate hearing. Woodall said in a statement that it is important “to keep this examination focused on packing industry concentration and the potential impact on livestock producers’ ability to compete in a free and fair market.” To contact this reporter:
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