USA, Greeley, Colo. During a 2 July conference call, JBS SA CEO Wesley Batista revealed that JBS USA Pork, a unit of the Sao Paulo, Brazil-based company, has been interested in purchasing Cargill’s US-pork based business for several years. The business was not for sale, but JBS’ offer of $1.45 bn. was apparently too good for Cargill to pass up.
The acquisition, announced 1 July, includes two Midwest pork-processing plants, one in Ottumwa, Iowa, and the other based in Beardstown, Ill. The agreement is subject to regulatory review and approval.
There are plenty of reasons JBS wanted to acquire the business, according to Jeremiah O‘Callaghan, director of investor relations for JBS. For starters, O‘Callaghan cited a strong demand of pork through 2021, noting that consumption and production is on target to increase 40% from 2000 to 2021. He also said that the company is uniquely positioned as the most competitive producer of pork and noted there is a substantial gap between the cost of pork production between the US and other countries.
Batista said the acquisition also allows JBS, the world’s largest meatpacker, to grow its portfolio of prepared and value-added products.
Andre Nogueira, CEO of JBS USA, said the company likes what it is getting in the deal, including $2.5 bn. in annual net revenue; 81% in the US and 19% in exports. Nogeuira noted that the acquired processing plants are in key areas geographically.
Cargill acquired both plants in 1987. In 2014 the plants processed a combined 9.3 mill. hogs. JBS will also acquire five feed mills (two in Missouri, and one each in Arkansas, Iowa and Texas), and four hog farms (two in Arkansas and one each in Oklahoma and Texas) if the deal is approved.
In a press release issued by Cargill on last Wednesday, Todd Hall, Cargill’s senior vice president, said the transaction promises to offer enhanced service to customers and more opportunities for employees and hog producers while providing an important source of protein to consumers around the world.
Batista said that cash and committed credit lines will be used to fund the deal, which will make JBS the No. 2 pork processor in the US behind Smithfield when approved.