February 20, 2009 / 12:20 PM / 11 years ago

UPDATE 2-Brazil's JBS abandons US National Beef takeover

 * JBS abandons National Beef takeover
 * Q4 EBITDA up 180 percent
 * Customers holding less stock
 * JBS shares rise 3.6 percent  (Recasts first sentence, adds comments by JBS president, U.S. senator, adds share movement, other details)
 By Roberto Samora
 SAO PAULO, Feb 20 (Reuters) - Brazil's JBS (JBSS3.SA), the world's largest beef producer and owner of JBS-Swift, has abandoned its attempt to take over U.S. meat company National Beef Packing Company LLC, saying it could not work out an agreement with U.S. authorities over terms of the deal.
 JBS became the No. 3 U.S. beef producer in 2008 when it bought the beef operations of Smithfield Foods Inc SFD.N, which included beef plants and the Five Rivers Ranch cattle feeding operation.
 At that time it also tried to buy National Beef in a deal valued at $970 million in cash, stock and debt.
 Since then, the Brazilian company has been in talks with the U.S. Justice Department about selling assets in order to gain approval to buy National Beef.
 But JBS said U.S. authorities insisted it sell two of its eight North American units so that it did not surpass the size of U.S. food giants Tyson Foods Inc (TSN.N) and Cargill Inc, after which "it decided not to go forward with the acquisition."
 "We fought hard but unfortunately the Department of Justice wanted to keep us the same size as Tyson and Cargill," said JBS President Joesley Mendonca Batista.
 JBS shares jumped after the company was left with a large cash holding when the deal fell through. Shares were trading up 3.6 percent at 4.63 reais, while the main Bovespa index .BVSP was down more than 3 percent.
 The Justice Department and 13 states had filed a lawsuit in federal court in October seeking an order to stop the proposed deal, arguing it would create the largest U.S. beef packer, slaughtering about 35 percent of U.S. cattle.
 U.S. antitrust authorities feared the deal would push down the price that slaughterhouses pay cattle ranchers, as well as raise prices consumers must pay for beef.
 The complaint filed in U.S. District Court in Chicago said that the major packers -- JBS, National, Tyson and Cargill -- together slaughtered more than 85 percent of U.S. cattle.
 "This deal would have substantially injured competition, and would have harmed ranchers and consumers," said Sen. Herb Kohl, a Wisconsin Democrat and chairman of the Senate antitrust subcommittee.
 Earlier on Friday, JBS posted a consolidated fourth-quarter loss of 53.5 million reais ($23 million), compared with a loss of 136 million reais in the year-earlier quarter.
 "Despite the consumption of beef protein having suffered little change in the past months, the lack of credit for exports has provoked the reduction in stocks in importer countries," JBS said in its earnings report.
 Earnings before interest, taxes, depreciation and amortization rose 180 percent to 265.9 million reais in the three months to end-December.
 JBS posted a consolidated 2008 net profit of 25.9 million reais, compared with a loss of 165 million reais a year earlier. Full-year EBITDA nearly doubled to 1.16 billion reais.
 The company has expanded rapidly in recent years with acquisitions of other beef processors in Brazil and abroad.
 In 2008, the company bought a 50 percent stake in Italy's Inalca, Australia's Tasman Group as well as Smithfield Food's beef operations. JBS had previously purchased Greeley, Colorado-based beef and pork processor Swift & Co.
 JBS said it was still difficult to foresee the recovery of consumer confidence under the current global financial crisis but it was prepared to endure a prolonged period of uncertainty.
($1 = 2.369 Brazilian reals)  (Reporting by Roberto Samora and Reese Ewing in Brazil, and Diane Bartz in Washington, editing by Will Waterman and Matthew Lewis))       

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