July 18, 2017

JBS Food Canada, a subsidiary of Brazil-based JBS SA, the largest meatpacker in the world, announced it has agreed to sell Lakeside Feeders – its beef cattle feedyard along with adjacent farmland in Brooks, Alberta, Canada to MCF Holdings Ltd. – a subsidiary of Alberta-based livestock business, Nilsson Bros. Inc., for C$50 million (US$40 million).

Lakeside Feeders is one of the largest cattle feedyards in Canada, with a capacity of 75,000 head that2 it sources from Alberta, British Columbia, Saskatchewan, and Manitoba. The operation was acquired by JBS in 2013, when the group formed JBS Food Canada, according to Drovers.

Under the terms of the agreement, MCF will continue to supply cattle to JBS Food Canada’s beef processing facility located in Brooks, and is planning to offer continued employment to the existing feedyard and farm employees at the JBS site.

Following the closing of the deal, which is subject to regulatory approval, JBS will still control one beef packing plant in Brooks, and a corporate headquarters located in Calgary.

The Fallout

The intended sale of Lakeside Feeders is the latest in a string of divestments for JBS following an industry scandal that left J&F Participações (J&F), the holding company of JBS, agreeing to pay more than $3 billion in fines under a leniency agreement between itself and the Brazilian Federal Prosecutor’s Office, after founders of JBS admitted to paying bribes to Brazilian politicians in exchange for preferential treatment and favors including access to cheaper credit, according to the Wall Street Journal.

With the goal of raising $1.8 billion, marked for sale is Northern Ireland’s Moy Park – one of the top poultry producers in the EU – bought by JBS in 2015 from rival Marfrig in Northern Ireland’s largest food deal to date for US$1.5 billion. Moy Park accounts for 25 percent of the chicken consumed in Western Europe, and holds 13 processing and manufacturing plants across Northern Ireland, England, France, the Netherlands, and Ireland, according to its website.

Also being put up for sale is Greeley, Colorado-based JBS Five Rivers Cattle Feeding LLC – the largest cattle feeding operation in the world -which the group acquired from Smithfield Foods and Continental Grain Co. in 2008. Five Rivers has the ability to handle 980,000 head of cattle at one time – or up to 10 percent of total annual U.S. cattle on feedlots, over its 11 feedlots across Colorado, Arizona, Kansas, Oklahoma, Texas, and Idaho.

Additionally, JBS is exiting three South American countries, after the sale of its assets in Argentina, Paraguay, and Uruguay to rival Minerva for $300 million has been cleared by the Brazilian federal court, and plans to sell its 19.2 percent stake in Brazilian dairy firm Vigor Alimentos SA.

A Double Hit

In addition to the internal challenges facing the company, the group has also been faced with external pressures as well.

The Brazilian beef industry was further tainted by an investigation this spring into 21 of the country’s meatpacking plants accused of bribing sanitation inspectors who then allowed shipments of rotten meat to be sold on both the Brazilian and foreign markets, leading to many countries suspending imports.

This led to JBS suspending beef production at 33 out of 36 plants across Brazil before cutting production by 35 percent across all of its facilities, reports the Wall Street Journal.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.