Dive Brief:
- As Brazilian meat giant JBS sells off some of its global assets in the wake of a corruption scandal in its home country, the company's majority stake in U.S. chicken provider Pilgrim's Pride is not for sale, according to a Reuters article.
- Pilgrim's Pride is a big part of JBS' long-term strategy of adding companies to its portfolio that reduce volatility and enhance margins, according to a company statement. "No core assets at JBS USA, or any other part of the world, are candidates for sale," the statement said.
- JBS made the announcement a day after an agreement to sell its Argentine operations, as well as plants in Paraguay and Uruguay, to Brazilian beef producer Minerva for $300 million.
Dive Insight:
JBS, the world's largest meat packing company, has been embroiled in controversy in its home country and worldwide for much of 2017. In March, Brazilian authorities began inspections of JBS plants after a scandal was uncovered that shows meatpackers may have bribed inspectors and officials to get rotting and contaminated meat on the market.
In April, former JBS Chairman Joesley Batista and his brother CEO Wesley Batista struck a deal with Brazilian prosecutors over charges that they paid nearly $183 million in bribes — which Brazil's president Michel Temer appears to have condoned, according to audiotapes — to nearly 1,900 politicians in recent years. The brothers resigned their positions at the company last month, and were hit with a $3.2 billion fine.
The fallout has not been kind to the global company, which is likely to delay a planned IPO of its JBS Foods International unit. The quick sale of other South American businesses also is indicative of turmoil in its structure. Before the scandal occurred, a significant reorganization of the company's business structure that would have made it easier to enter international markets was stopped last year by a shareholder veto.
But in the United States, JBS's businesses are running fairly smoothly and scandal-free. The company's U.S. arm currently has a 78.5% stake in Pilgrim's Pride, which it started building in 2009. The majority purchase came after the chicken producer filed for bankruptcy protection, crushed by debt and high feed costs.
Pilgrim's Pride has performed well in U.S. markets, reporting $2.02 billion in sales on its most recent earnings report — a 2.9% increase from a year earlier. Last year, the company announced the acquisition of Midwest-based premium chicken provider GNP Company for $350 million. In a transcript of the most recent earnings call, Bill Lovette, Pilgrim's Pride president and CEO, said his company is in position to soon be the market leader in organic chicken — a rapidly growing value-added sector.
It seems like Pilgrim's Pride is a world away from the turmoil that is roiling its parent company. It makes sense for JBS to retain its stake as long as possible as a respite from its current problems.