JBS sells LatAm units to Minerva

Sao Paulo | Reuters — JBS SA has agreed to sell plants in Argentina, Paraguay and Uruguay to rival Minerva SA for US$300 million, as the world’s largest meatpacker seeks cash to weather a corruption scandal that caused a spike in funding costs.

JBS will use proceeds from the transaction to cut debt, according to a securities filing on Tuesday. The deal has already been approved by the boards of both companies.

Minerva said in a conference call it will pay US$280 million in cash at the closing of the transaction, which is expected in July. The balance will be paid after the conclusion of due diligence.

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The agreement is the first by embattled JBS since its founders admitted to paying bribes to politicians in exchange for favours in a scandal that threatens to topple President Michel Temer.

J+F Investimentos, JBS’ parent company, has signed a leniency agreement and will pay 10.3 billion reais (C$4.2 billion) for its role in the crimes admitted by the Batista family, who control the group.

Weakness at JBS’ Mercosur division as well as a stronger Brazilian currency contributed to a 14.3 per cent drop in the company’s net revenue in the first quarter.

Minerva increased its net revenue estimate to a range of 13 billion reais to 14.4 billion reais in the 12 months ending June 2018, it said, to account for a 52 per cent increase in slaughtering capacity after the acquisition.

Minerva common shares rose 5.2 per cent, touching a four-month peak, while JBS shares advanced three per cent.

JBS had experienced difficult operating conditions in Argentina. It entered the country in 2001 as it began an international expansion. By 2005, it had five beef processing plants there.

JBS opted to close some of them around 2012 as a result of exporting quotas imposed by then-president Cristina Fernandez, who wanted to limit sales abroad to boost domestic supplies and try to control meat prices.

Minerva explained that of the five plants acquired from JBS in Argentina, four are closed and will remain so until market conditions improve there.

All plants bought from JBS have certification to export to the U.S., Japan and China, Minerva said.

The transaction with Minerva is subject to regulatory approval and the final price will be adjusted by the amount of working capital left at the acquired units, according to filings from both companies.

Reporting for Reuters by Ana Mano in Sao Paulo.

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