XL Foods’ operator to become owner

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The world’s biggest meat packing company has made its marriage intentions official for beleaguered Alberta beef packer XL Foods.

JBS USA, the Colorado-based U.S./Australian arm of Brazilian meat giant JBS, said Wednesday its new Canadian subsidiary will exercise an option to buy the Edmonton company’s beef packing assets in Alberta — and, pending approval from U.S. antitrust watchdogs, two XL plants in that country.

JBS has held an exclusive option on those XL assets since Oct. 17 as part of its “management services” agreement to run XL’s recall-battered Brooks, Alta. beef plant. The option values the total assets to be sold at US$100 million, to be paid half in cash and half in JBS shares.

JBS said Wednesday it expects to complete the deal by Monday (Jan. 14).

“After several months of careful consideration of the option and nearly three months of successfully managing the Lakeside facility, we have determined that the Canadian operations will serve as an important asset to our strategic global beef production model,” JBS USA president Bill Rupp said in a release Wednesday.

Under the deal, JBS would buy the Brooks plant, which is one of the largest beef plants in Canada with a slaughter capacity of about 4,000 head of cattle per day. It would also get XL’s 70,000-head capacity feedlot and 6,600 acres of “adjacent farmland” near Brooks.

The Alberta government last month gave JBS a waiver on its rules governing foreign ownership of farmland. The exemption allows JBS to keep the XL feedlot and farmland, as long as the assets remain active in meat processing in the province.

JBS’ $100 million option also includes XL’s smaller beef packing plant at Calgary, which has capacity to handle about 1,000 head per day but has been offline since May 2011.

JBS said it “awaits regulatory review from U.S. authorities” before it would exercise the part of the option covering XL’s two U.S. facilities: a beef packing plant at Omaha, with capacity to handle 1,200 head per day, and the Four Star Beef plant at Nampa in southwestern Idaho.

The Nampa plant, with capacity for 1,000 head per day, was idled indefinitely in June 2011.

The two U.S. plants “will continue to be operated by XL Foods during the option period,” JBS said Wednesday.

“Appears over”

No other XL assets — such as its mothballed beef plant at Moose Jaw, Sask. — are included in JBS’ option. Also, JBS reiterated Wednesday, it “will in no case assume any of XL Foods’ debt or liabilities.”

Sao Paulo, Brazil-based JBS became one of the biggest meat companies in the U.S. when it bought Swift in 2007, Smithfield Beef in 2008 and Pilgrim’s Pride in 2009. It also owns 12 U.S. feedlots.

JBS, which has no other Canadian assets, last month named beef industry consultant Willie Van Solkema, a former beef packing executive for Cargill and Canada Packers, as president of JBS Food Canada, JBS USA’s new Canadian arm.

JBS rode into Canada to manage the Brooks plant after the facility’s federal operating license was suspended in September. The suspension followed a massive beef recall upon findings of E. coli O157:H7 bacteria in samples from the plant — plus 18 confirmed cases of illness across Canada, involving the exact strain found in the XL beef.

The Brooks plant’s license was reinstated Oct. 29 under JBS management. Canada’s federal public health agency stated Dec. 21 that the XL-related O157 outbreak “appears to be over.”

The JBS deal also will not remove XL’s parent, Edmonton-based Nilsson Bros., from the beef business. The Nilssons continue to own cow-calf ranches, auction markets, feeder buying services, livestock commodity trading and financing operations and a farm and ranch insurance business.

Related stories:
JBS to manage XL beef plant, with option to buy, Oct. 18, 2012
Meat packer JBS names chief for Canadian operations, Dec. 6, 2012
JBS gets break on Alta. land ownership rules, Dec. 31, 2012