DENVER-
In a union of two large meat-processing companies, a Brazilian firm announced Tuesday it will acquire Swift & Co. in a $225 million cash deal that will give the combined company greater access to expanding markets and operations on three continents.
J&F Participacoes S.A., which controls Brazil’s leading beef exporter Friboi, won out over other bidders for Swift, which was highly sought after because not many meat-packaging plants are put up for sale in wake of U.S. industry consolidation, analysts said.
Swift, headquartered in Greeley about 50 miles north of Denver, is the third-largest U.S. processor of beef and pork and has plants in six states and an operation in Australia.
“From a competitive market standpoint I think it’s good,” said Steve Meyer, president of Paragon Economics Inc., an Iowa-based livestock marketing firm. “We really didn’t need to lose another company so this keeps them independent.”
J&F will buy Swift from its owners, HM Capital Partners of Dallas and Vail-based Booth Creek Management Corp. It will assume $1.2 billion in debt and pay transaction-related expenses.
The companies said the combined company will become the largest beef processing operation in the world. Closing, which is contingent upon antitrust reviews, is expected in mid-July.
Sao Paulo-based J&F is the controlling shareholder of JBS, which is the largest beef processor in Latin America, with 23 plants in Brazil and six in Argentina. It had nearly $1.8 billion in sales last year.
Through Swift, J&F will gain access to global markets, particularly in Asia, where imports of beef are strictly regulated because of mad cow disease, or bovine spongiform encephalopathy, which has been linked to more than 150 human deaths worldwide, and foot-and-mouth disease, a highly contagious viral disease that affects cloven-hoofed animals like cattle and pigs.
“I think this is first significant investment (in the U.S. industry) by a foreign entity,” said Steve Kay, editor and publisher of the trade publication, Cattle Buyers Weekly. “They obviously want to put themselves in position a global leader in beef processing.”
Meyer, who was surprised by the announcement, said J&F entered the bidding later than other companies and that few thought it would be successful.
“They weren’t on anybody’s radar until just a few weeks ago,” he said. “This company seems to have paid quite a bit of money … and obviously outbid the others so that’s the way it’s going to be.”
In an interview with The Associated Press, Swift Chief Executive Officer and President Sam Rovit said he does not expect large-scale changes. “We’ll be able to access their customers with a broader pallet of products and they’ll be able to access our customers,” Rovit said.
“Our view is that while they are likely to make some changes. By and large, they are buying into this team and the strategy of this team, and that’s great for our employees and for our customers,” he said.
The owners of Swift, which was targeted by immigration raids in December, began a strategic review in January to decide whether the operations should be sold.
“We had a number of parties that were competing for our business which, to us, was never a surprise given that this was the last large free radical left in meatpacking sector of any United States,” Rovit said.
Analysts speculated that other major U.S. meatpackers looked at potential partnerships to acquire Swift’s assets and also comply with antitrust issues.
Swift, which has about 20,000 employees, was purchased by HM Capital and Booth Creek in September 2002 from ConAgra Foods Inc.
In December, federal immigration authorities rounded up nearly 1,300 workers at Swift plants in Colorado, Minnesota, Iowa, Nebraska, Texas and Utah. The six plants represented all of Swift’s domestic beef processing capacity and 77 percent of its pork processing capacity. The company said last month that it has refilled positions left vacant as a result of the raids.
Swift initially estimated the financial effect of the raids at $30 million but has raised that estimate to as much as $50 million because it took longer than expected to return the beef plants to full production, which caused higher costs and led to lost business opportunities.
In April, Swift said the raids cut into fiscal third-quarter sales and profits at the company’s beef and pork operations. The company said it was also beginning to realize benefits of recently enacted cost-cutting efforts.
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Associated Press business writer Alan Clendenning contributed to this report from Sao Paulo.
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