IN a remarkably speedy decision last week, the US Department of Justice and Federal Trade Commission said they had no objections to JBS Holdings Inc.'s acquisition of a majority ownership of Pilgrim's Pride Corp., putting the largest chicken company in the US in the control of Brazil's JBS Holdings, which is already the third-largest beef and pork processor in the US.
The acquisition was announced just last month, but observers said then they anticipated that authorities would clear the proposal primarily because JBS USA has no operations in chicken production, would become a formidable competitor to Tyson Foods Inc. - actually increasing marketplace competitiveness - and would keep Pilgrim's Pride from going under.
Tyson Foods is the largest beef and second-largest pork processor in the US and second-largest chicken company.
Pilgrim's Pride was in bankruptcy reorganisation with debt so great that it faced failure, and the acquisition is principal to its reorganisation strategy, which calls for JBS Holdings to buy 64 per cent of a new Pilgrim's Pride for $US800 million, proceeds from which would be used to pay all allowed claims against the company.
Pilgrim's Pride then would cancel and exchange all of its remaining stock for an equal number of shares in the new company, accounting for 36pc of the reorganised company.
The plan was filed with the US Bankruptcy Court for the Northern District of Texas at the end of September. Pilgrim's Pride is based in Pittsburg, Texas.
Pilgrim's Pride said last week it anticipated that the court would approve the plan in time for it to emerge from bankruptcy by the end of this year.
The company filed for bankruptcy protection last year after recording a fiscal 2008 loss of almost $US1 billion due to extraordinarily high feed costs, poorly taken grain hedges, industry-wide overproduction and recession-influenced demand problems and poor pricing.
It subsequently closed three complexes - one of which it sold - and several plants to improve operating efficiencies, its supply-and-demand situation and pricing but was still struggling with debt when JBS Holdings proposed the acquisition.
Pilgrim's Pride operates 33 plants in the US, three plants in Mexico (where it is the second-largest chicken producer) and one plant in Puerto Rico and has a daily processing capacity of 7.2 million birds.
It had fiscal 2008 sales of $8.5 billion.
Clearance of the acquisition grants JBS Holdings the ability to enter the US chicken industry, said chief executive officer and president Wesley M. Batista.
"As a successful US beef and pork processor, we believe we are well positioned to bring that same competitive energy to Pilgrim's Pride," he said.
JBS Holdings is the US subsidiary of JBS SA, the largest beef processor and exporter in the world, and is planning an initial public stock offering in the US that will total $US2 billion.
JBS SA, based in Sao Paulo, Brazil, reported 2008 sales of 145.1 billion reals ($US12.7 billion).
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