Alberta clears way for JBS to acquire XL

Alberta clears way for JBS to acquire XL

- Government says economics support JBS. - U.S. groups believe acquisition will harm producers and consumers. - JBS would become large

THE Alberta government has waived its restrictions on foreign ownership of land in the province for JBS S.A., clearing the way for JBS to proceed with its acquisition of XL Foods in Brooks, Alb.

Alberta's premier and cabinet ministers approved the waiver two weeks ago.

Normally, foreign ownership of land is limited to eight hectares (19.8 acres), but the land at issue in the acquisition covers 3,045 hectares (7,524.4 acres) and includes land for the XL beef packing plant and feedlot, as well as 6,600 acres of farmland.

Exemptions have been granted in the past, normally for gas and oil projects, in response to economic considerations. A spokesperson for the Alberta government said the economics in this case are clear, noting that JBS can't make the acquisition without acquiring the land.

JBS is based in Brazil and operates in the U.S. as JBS USA, with headquarters in Greeley, Colo. JBS USA is the acquiring entity.

JBS USA assumed management of the XL plant, Lakeside Packers, in October after it had been closed by the Canadian Food Inspection Agency during an investigation surrounding the discovery of Escherichia coli O157:H7 in the plant's products that prompted the largest-ever beef recall in Canada (Feedstuffs, Sept. 28, Oct. 8 and Oct. 22, 2012).

The plant handles 4,500 head of cattle per day and is the second-largest meat packer in Canada. It employs 2,200 people, and Brooks city officials have said the facility is an important economic engine in the region.

The plant was permitted to reopen under JBS USA management, which took over after reaching an agreement with XL's owner, Canadian rancher Nilsson Bros.

The agreement gives JBS rights to acquire the Brooks plant, farmland and feedlot, as well as XL's cattle plant in Calgary, Alb., that handles 1,000 head per day and its two plants in the U.S.: a 1,000-head cattle plant in Nampa, Ida., and a 1,200-head cow plant in Omaha, Neb.

JBS will pay $100 million for the properties: $50 million in cash and $50 million in stock.

XL is headquartered in Edmonton, Alb.

 

Opposition

Meanwhile, more than 40 organizations have sent a letter to the U.S. Department of Justice asking it to extend its investigation of the impact the acquisition -- particularly of the two U.S. plants -- would have on concentration in the U.S. beef industry.

The organizations said they believe the acquisition "would reduce competition and seriously harm both cattle producers and consumers."

The department's antitrust division refused to approve JBS's proposed acquisition of National Beef Packing Co. in 2008, an acquisition that would have made JBS USA the largest beef processor in the U.S. (Feedstuffs, Oct. 27, 2008).

The organizations, which include the National Farmers Union, R-CALF USA and the Organization for Competitive Markets, urged DOJ not to "retreat" from its 2008 decision "to curb pervasive erosion of competition" in the cattle markets and the consumer beef markets.

However, the Nampa plant has been closed for more than 18 months, and cattle producers in Idaho, who must now incur additional expenses to ship cattle to plants outside the region, already have said they would welcome new ownership that might reopen the plant.

Furthermore, the Omaha plant slaughters bulls and cows, not fed cattle, and JBS USA has no such plants.

Accordingly, analysts have said it's hard to conclude that the acquisition of the plant would further concentrate the industry.

JBS USA is the third-largest beef processor in the U.S., and acquiring and running the two XL plants would make it the largest, according to the Feedstuffs Reference Issue & Buyers Guide (Table). The company is the largest cattle feeder in the U.S.

JBS USA, which includes Australian cattle and lamb operations, also is the third-largest pork processor in the U.S. and holds a majority ownership in Pilgrim's Pride Corp., the second-largest chicken integrator.

JBS, with headquarters in Sao Paulo, Brazil, is the largest beef processor in Brazil and the largest beef exporter in the world.

 

U.S. beef industry concentration (by packers)*

Company ranking

Head

Company ranking

Head

before XL acquisition

per day

after XL acquisition

per day

1. Cargill

30,000

1. JBS USA

31,050

2. Tyson Foods

28,900

2. Cargill

30,000

3. JBS USA

28,850

3. Tyson Foods

28.900

4. National Beef Packing

14,000

4. National Beef Packing

14,000

5. American Foods Group

7,200

5. American Foods Group

7,200

6. Greater Omaha Packing

2,900

6. Greater Omaha Packing

2,900

7. Nebraska Beef

2,600

7. Nebraska Beef

2,600

8. AB Foods

1,600

8. AB Foods

1,600

8. Caviness Beef Packers

1,600

8. Caviness Beef Packers

1,600

8. Sam Kane Beef Processors

1,600

8. Sam Kane Beef Processors

1,600

*Concentration before and following JBS USA's acquisition of two XL Foods plants in the U.S.

Source: Feedstuffs Reference Issue & Buyers Guide.

 

Volume:85 Issue:01

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