JBS Jumps on BNDES-Approved Plan for Unit IPO in U.S

December 6, 2016 09:50 PM

JBS SA, the world’s largest meat company, jumped the most in seven months as Brazil’s national development bank BNDES endorsed a new reorganization plan after having rejected a similar proposal six weeks ago.

The company’s board unanimously approved the registration of JBS Foods International BV, a Netherlands subsidiary accounting for about 85 percent of JBS’s revenue, for an initial public offering on the New York Stock Exchange in the first half of 2017, the company said Monday in a filing. The move will help unlock value by providing greater access to equity and debt markets, reducing capital costs, JBS Chief Executive Officer Wesley Batista said Tuesday. 

BNDES, which vetoed a May proposal after considering that it would denationalize the company and substantially impact shareholders’ rights and duties, said the new strategy is beneficial. The plan respects minority shareholders as it keeps control of JBS in Brazil while seeking external savings to boost the company’s businesses.

“The proposal is in line with company’s growth trajectory,” BNDESPar, the BNDES’s investment arm that is JBS’s second-largest shareholder, said in a statement in response to questions. “BNDESPar reiterates its support to the company and believes in its value creation potential.”

Surging Shares

Gilberto Tomazoni, who has overseen JBS’s global operations, will be the CEO of JBS Foods International, which will comprise all businesses outside of Brazil, including U.S. beef and pork plants and U.K. chicken producer Moy Park. The unit will also include Seara, a Brazilian chicken and processed-food business. Wesley Batista will be the chairman of the international company. The Brazilian beef business and related activities will be directly controlled by the parent company, led by Batista as CEO.

“We have been seeking a structure that better reflects what the company has become,” Batista said Tuesday on a conference call with investors.

Shares of the parent company jumped as much as 18 percent in Sao Paulo, the biggest intraday gain since May 12. JBS gained 16 percent to 10.80 reais at 5:22 p.m. in Sao Paulo, giving the company a market value of 30.9 billion reais ($9 billion). The company’s $775 million in notes due 2023 climbed a record 3.6 percent.

All the proceeds of the IPO will be used to pay debt. The company could raise 10.5 billion reais in equity by selling a 30 percent stake of International Foods unit in the IPO, which would allow it to reduce net debt by the end of 2017, Banco Itau BBA SA said in a report. It’s too early to estimate the size and valuation of the offering, Batista said on the call.

JBS bonds and shares plunged Oct. 26 after BNDES vetoed a sweeping restructuring plan that would have put the company’s corporate registration in Europe and list its stock in New York. BNDES said it didn’t consider the plan to be in the best interests of the company and its shareholders, while adding it would be open to considering other proposals.

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