A controlling interest in National Beef Packing Company is being sold to an indirect subsidiary of Marfrig Global Foods of Brazil, according to a release. The 51% stake is being valued at $969 million.
The company's Kansas City-based operations and management will not change, and Tim Klein will continue to be president and CEO of National Beef after the transaction closes in the second quarter of this year.
The deal will make Marfrig the second-largest beef producer in the world, according to the company. National Beef is currently the fourth-largest beef processor in the U.S.
Besides its beef operations, National Beef also processes and markets pork, beef byproducts and leather to foodservice, retail and wholesale customers. The company said its sales totaled $7.4 billion in fiscal 2017.
Marfrig can expect the acquisition to not just deliver access to the U.S. beef market, but enable it to gain access to South Korea and Japan, both of which are not accepting imports of Brazilian beef following a scandal involving bribes and tainted meat.
Marfrig has a lot to gain from the transaction. As the second-largest global beef producer, it would be able to expand its reach into the U.S. and presumably exercise a greater amount of control over a larger proportion of the world's beef market. For National Beef, the transaction will boost its global footprint and enable it to gain access to more markets that could potentially generate lower costs that are then passed on to its customers.
Tim Klein, president and CEO of National Beef said in a statement that Marfrig's "broad global food platform will further strengthen our efforts to build our brand in new and existing markets as the demand for high quality U.S. beef grows."
In the U.S., consumption of red meat and poultry is projected to hit a record high of 222.2 pounds this year, according to the U.S. Department of Agriculture. Both demand and prices have increased — despite the rising popularity of plant-based alternatives — and meat exports are up. This contrasts with 2007 to 2014, when demand dropped 9% due to drought and rising ethanol prices. Marfrig is no doubt keen to tap into this growing market.
The Institute for Agriculture & Trade Policy said the growth of Brazilian meatpacking businesses has benefited from subsidized loans and other resources from the Brazilian National Development Bank which, along with M&A and consolidation moves, helped them to become large transnational corporations. Marfrig is among them, along with Brasil Foods and JBS — the latter now in disarray from a corruption scandal.
IATP added that, besides its cattle processing, Marfrig also handles millions of pounds of pork, chicken, sheep and fish each year. Through its Keystone Foods operation, the company supplies industrial food products to McDonald's, Subway and Wendy's. However, according to Meatingplace, the company plans to sell Keystone during the next few months, about the same time its purchase of a majority stake in National Beef closes.