Brazil’s main meat processor JBS praised the government for lowering a local tax that will ultimately benefit consumers and farmers. JBS is also in the process of becoming the world’ leader in animal protein food by taking over US chicken producer Pilgrim’s Pride and merging with Brazil’s Bertin SA.
The Brazilian government published a decree in its Official Journal which exempts the whole beef chain from paying a local tax known as PIS/Pasep and Cofins which represented 9.25% of gross sales on the domestic Brazilian market. The decree becomes effective November 01, 2009.
JBS said that “this exemption represents a very positive move on the part of the Brazilian Authorities and benefits the whole production chain from ranchers to consumers through the processing sector making beef and beef products available to a greater public”.
In corporate news JBS issued a trading statement to show that plans for the merger with the operations of Bertin SA remain on course. Although the integration of the operations of Bertin and JBS has not been defined, the management of both companies have said that the final plans should be ratified.
The companies have established a committee from the boards to look into the details of the merger. However, before it can go ahead JBS will have to find 2.5 billion US dollars capitalization in JBS USA Holdings, in order to avoid any impact in the current indebtedness level of JBS. The deal will also need the approval of antitrust authorities in Brazil and abroad.
When the deal is concluded, whichever structure is chosen to join the operations of Bertin and JBS, the current controlling shareholders of JBS and Bertin will hold indirect equity participation in JBS, through a new holding.
The managers of JBS said they believe that the integration of the operations of Bertin and JBS will be advantageous to the shareholders of JBS, creating a company that will be the world leader in the animal protein sector and reaffirming the position of Brazil in a highly competitive and globalized market
Meantime in the US bankrupt chicken producer Pilgrim's Pride Corp said it received court approval to begin soliciting shareholder acceptance of its reorganization plan, with shareholder voting to be completed by December first.
The reorganization plan includes selling a majority stake to Brazilian meat company JBS. Under the deal JBS would buy 64% of the common stock of the reorganized company for 800 million US dollars.
US regulators earlier this month approved the JBS deal, but it still needs bankruptcy court approval. Pilgrim's Pride expects the plan to be confirmed by the court in time for it to emerge from Chapter 11 bankruptcy protection before the end of the year, it said.
Creditors will not be voting on the plan and will be fully repaid upon the company's exit from bankruptcy, it said. The company entered bankruptcy in December 2008 after a year of losses due to high feed costs, low chicken prices, and large debt.
JBS is currently the world's largest beef producer and exporter with a daily harvesting capacity of 73.900 head of cattle and the largest global exporter of processed beef. The company's operations include 25 plants located in 9 Brazilian states and 6 plants located in 4 Argentine provinces, in addition to 16 plants in the US, 10 in Australia and 8 in Italy.
Additionally, JBS S.A. is the third-largest pork producer in the US, with a harvesting capacity of 48.500 head per day. In 2008, JBS S.A. generated net revenue of Reais 30.3 billion. Its brands Friboi, Swift, Swift and Company,, La Herencia,” 1855 Swift Premium, Maturatta,” Cabaña Las Lilas, Organic Beef Friboi, Anglo, Mouran, Plata, King Island, Beef City, AMH, Inalca, Montana and Ibise” are widely recognized.