- Brazil-based Marfrig Global Foods will increase its stake in National Beef Packing to 81.7% from 51% by purchasing the remaining 31% owned by U.S.-based Jefferies Financial Group for $860 million. Marfrig initially purchased the 51% stake from Jefferies and other shareholders in June 2018, according to Marfrig.
- With this sale, Jefferies, which purchased a 79% stake in the company eight years ago, realized a return of $3 billion in cash, or 3.3 times its original investment in National Beef, according to the company's release.
- The sale is expected to be finalized by the end of November.
This transaction marks a major shift for National Beef, as the Kansas-based company is now almost fully owned by a Brazilian meatpacker. While it appears that business as usual will continue and Tim Klein, president and CEO of National Beef will stay in place, there may be quite a few, less-public changes in the works.
In 2018, Marfrig took a majority stake in National Beef, currently the fourth-largest beef processor in the U.S. When Marfrig bought a portion of the beef producer, it expanded its global reach to become the second-largest in the world, according to the company. The increased stake now gives Marfrig an even stronger foothold in the U.S. market.
By increasing its stake in the American beef company, Marfrig is opening new doors and gaining access to markets that were previously closed off. Following a scandal involving bribes and tainted meat in 2017, China, the European Union, Chile and South Korea, which consumed cumulatively a third of Brazil’s exported meat, according to the Economist, shut their doors to Brazilian exports.
Although the ban was temporary, the European Union voted to indefinitely ban meat imports from several Brazilian suppliers last year, affecting 35% of the country's exports. Twelve of the 20 plants that the European nations banned belonged to Brasil Foods (BRF), which admitted to bribing food inspectors earlier this year.
With barriers still in place to a major Western market, Marfrig's stake in National Beef offers a workaround to provide meat to Europeans and other countries where Brazil does not have favorable trade agreements. Having access to American beef could potentially lower costs in some cases, which could then be passed onto customers. The commodity markets are notoriosly volitile, and with trade spats further complicating things, a company that has access to multiple markets to source from could have an advantage over its competitors.
Earlier this year, BRF was in talks to merge with Marfrig, but the conversation between the two companies stalled this summer. Marfrig's controlling stake in such a large U.S.-based beef enterprise could reignite interest in forging a partnership with one of the world's largest food companies.