JBS Falls as Police Search Office Building in Carwash Probeby and
Target is Eldorado Brasil, also controlled by Batista family
Finance Minister Meirelles was chairman of holding company
JBS SA, the Brazilian meat giant run by the Batista family, fell after a pulp maker they also control became the latest company to become embroiled in a corruption probe that has shaken the country.
The shares fell 5 percent to 9.50 reais at the close in Sao Paulo, the most since April 22. This morning, police officers searched the Sao Paulo offices of Eldorado Brasil Celulose SA, which are in the same building as JBS’s headquarters. The house of chairman Joesley Batista was also searched, according to a company spokesman.
JBS confirmed the search and said the meat producer wasn’t the target of the operation and that no arrest warrants were issued for its executives. Police sought documents related to Eldorado, part of the J&F Investimentos conglomerate that also controls JBS, he said.
Eldorado confirmed its headquarters were searched. “The company doesn’t know the action’s motivation and provided all the information requested,” it said in a statement.
Brazil’s federal police haven’t provided details yet. The two-year probe, known as Carwash, initially focused on state-run oil producer Petrobras but has grown to ensnare some of Brazil’s biggest conglomerates and top politicians.
Eldorado, which last month issued $350 million in notes, has about 8.2 billion reais ($2.54 billion) in debt. Most of the loans are from state-run institutions including national development bank BNDES and Caixa Economica Federal. Brazil’s federal audit court said in November that it found evidence that JBS received “special treatment” from BNDES. The company denied any wrongdoing.
JBS’s $1 billion of bonds due 2020 dropped 1.1 percent, the most since January, to 104 cents on the dollar. Eldorado’s $350 million in notes due 2021 declined 0.5 percent to 95.88 cents, while yields climbed to 9.69 percent, the highest since they started trading on June 10.
The police search "can really hurt Eldorado’s new bonds, and is also potentially negative for JBS," said Carlos Gribel, the head of fixed income at Andbanc Brokerage in Miami. "All Brazilian companies doing businesses with government are running this kind of risk at this moment."
Brazil’s Finance Minister Henrique Meirelles was the chairman of J&F before joining the government of Acting President Michel Temer.
JBS, which is led by Chief Executive Officer Wesley Batista, said in May that it plans to issue shares in the U.S. and turn its Brazilian operation into a subsidiary. JBS became the world’s biggest meat producer after a decade-long $20 billion acquisition spree that was supported by Brazil’s national development bank. BNDES holds a 24 percent stake in the company.
Meirelles said in an interview Friday on a local radio station that he has ended his ties with the private sector.
Eldorado, which isn’t publicly traded, is prepared to sell shares as soon as it sees a window of opportunity to fund its expansion plan, Chief Executive Officer Jose Carlos Grubisich said in an interview on June 10.