JBS Said to Weigh U.S. Unit IPO as Valuations Eclipse BrazilGerson Freitas Jr. and Cristiane Lucchesi
JBS SA, the world’s biggest meat producer, is considering reviving plans for an initial public offering of its U.S.-based unit as North American stock valuations rise relative to Brazil, according to two people with direct knowledge of the matter.
The Sao Paulo-based company is sounding out investment bankers for a proposal to sell shares in JBS USA Holdings Inc., as the Greeley, Colorado-based company is known, one of the people said, asking not to be identified because the matter is private and no decisions have been made. The transaction could happen as soon as this year, the person said.
JBS, whose $17 billion buying spree in the past decade included U.S. rivals Pilgrim’s Pride Corp. and Swift & Co., shelved the proposed U.S. unit IPO in 2009 when Brazilian markets offered better valuations. Now JBS’s enterprise value in Brazil is 6.6 times Ebitda, half the levels of three years ago, while U.S.-based rival Tyson Foods Inc.’s ratio has doubled to 11, according to data compiled by Bloomberg.
Proceeds from the IPO could be used to reduce debt and obtain an investment-grade credit rating or make acquisitions, one of the people said. JBS didn’t respond to requests for comment made by e-mail and telephone.
While JBS has rallied in the past six month, Brazil’s benchmark equity index has slumped as investor confidence is undermined by deepening political turmoil and public dissatisfaction. A million Brazilians took to the streets last week to protest corruption, higher taxes and President Dilma Rousseff’s handling of the economy.
JBS canceled a planned IPO of JBS Foods SA, its poultry, pork and processed-food unit in Brazil formed after the 2013 acquisition of Seara Brasil from Marfrig Global Foods SA, because of poor market conditions, it said Feb. 27.
JBS USA -- which owns beef, pork and poultry businesses in U.S., Canada and Australia -- accounts for 59 percent of JBS consolidated Ebitda, according to data reported by the company. That includes Pilgrim’s Pride, which already trades in the U.S.
JBS shares climbed 1.72 percent to 14.16 reais at 4:11 p.m. in Sao Paulo. Brazil’s benchmark index rose 0.6 percent.
While JBS’s market value-to-Ebitda ratio is near the lowest relative to Springdale, Arkansas-based Tyson in more than five years, the stock isn’t cheap in all metrics. After surging 86 percent in the past year, JBS is trading at 1.7 times book value, the first time in three years that it’s more expensive by that gauge than Tyson, which fetches 1.6 times, according to data compiled by Bloomberg.
JBS is outperforming global competitors in the stock market this year, and its bonds are generating the biggest returns among all Brazilian corporate securities tracked by Bloomberg, as Brazil’s plunging currency boosts overseas meat sales and helps generate record amounts of cash.
The company’s profit more than doubled to a record 2 billion reais in 2014, it reported on March 11.