JBS’s Parent Faces Brazil Probe on Havaianas Loan Agreement

Updated on
  • J&F said to receive 2.67 billion reais from state-owned Caixa
  • Bankers said deal of this size usually would be syndicated

Brazil’s audit court is investigating a loan from a government-owned bank to holding company J&F Investimentos SA, according to a court document.

The 2.67 billion-real ($823 million) loan from Caixa Economica Federal, Brazil’s second-biggest lender, financed J&F’s purchase of Havaianas flip-flop maker Alpargatas SA from embattled builder Camargo Correa SA last year, said two people familiar with the matter who asked not to be identified because the terms aren’t public. J&F is the parent company of meatpacker JBS SA and pulp producer Eldorado Brasil Celulose SA.

The financing’s timing and terms gave J&F an advantage over rival bidders because it allowed the company to pay entirely upfront in cash, said three people involved in the transaction. It was exceptional to offer a loan of that size without syndicating it to other banks, especially during a time in which state banks were scaling back lending, and the loan’s two-year grace period and seven-year repayment period also weren’t standard, said two of the people.

Now, Brazil’s audit court, known as the TCU, which uncovered the budget breaches that were the grounds for former President Dilma Rousseff’s impeachment, is taking a closer look at the transaction to see if any irregularities exist, according to a document on the court’s website. An official for the Brasilia-based court said there’s no deadline to complete the inquiry and declined to comment further.

J&F’s press office declined to comment on the terms of the loan, the TCU investigation or its purchase of Alpargatas. Caixa’s press office said in an e-mailed response to questions that it analyzes loans to companies according to central bank rules, adding that it can’t give details on clients or transactions.

The TCU investigation is the latest in a string of probes scrutinizing J&F, which is controlled by the Batista family, and its units. The TCU has already said it’s looking into financing provided by another state bank, BNDES, to JBS to acquire companies in the U.S., including Swift & Co. And Federal Police last week raided the offices of Eldorado as part of an investigation into alleged fraud at the pension funds for workers including those of state-owned Petroleo Brasileiro SA and Caixa.

J&F said the company’s executives are cooperating with the previously announced investigations.

The Batistas have historically held close ties to Brazil’s government, with the media dubbing JBS a “national champion” after BNDES cash helped finance part of a $20 billion, decade-long acquisition spree that turned it into the world’s largest beef and poultry producer. Most recently, Brazil President Michel Temer in May tapped J&F’s then-chairman, Henrique Meirelles, as finance minister.

J&F’s purchase of Alpargatas helped Camargo Correa weather the fallout from corruption investigation at state-run oil giant Petrobras and Centrais Eletricas Brasileiras SA’s nuclear-power unit Eletronuclear. The construction firm was forced to unload assets after it agreed to pay about 800 million reais to Brazil’s antitrust agency Cade in agreements related to the two cases.

J&F is offering to buy the remaining 33 percent stake in Alpargatas voting shares that it doesn’t already own in an auction slated for Sept. 30. J&F offered to buy the stock for 10.08 reais apiece, or 804 million reais. Alpargatas rose 1.6 percent to 10 reais on Monday.