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Marfrig acquisition of National Beef draws fire from opponents
 


SAO PAULO — Brazilian company Marfrig Global Foods has announced it will acquire 51 percent ownership of U.S.-based National Beef Packing Co., the fourth-largest beef processor in the United States.

Marfrig has agreed to pay $969 million for the equity interest and, once the transaction concludes, will become the world’s second-largest beef processor, with consolidated sales of $13 billion.

Marfrig and National Beef made separate announcements on April 9. According to the Marfrig statement, the deal will allow Marfrig to gain access to markets such as Japan and South Korea.

Founded in 1992, National Beef reported sales of $7.3 billion last year and, since 2011, has been controlled by Leucadia National Corp., which currently holds a 79 percent interest. Leucadia is a diversified holding corporation based in New York.

“We are pleased to remain a significant shareholder in National Beef and to partner with Marfrig and the company’s management team in its continued development,” said Rich Handler, CEO, and Brian Friedman, president of Leucadia.

Also, the key executives of National Beef, including CEO Tim Klein, will continue to manage and remain at the company. The board of managers of National Beef will consist of nine members, of which five will be nominated by Marfrig, two by Leucadia and two by the other minority members.

With the acquisition of National Beef, Marfrig consolidates its strong position in the beef industry, which is Marfrig’s original core business. National Beef exports to 40 countries, including Japan, which is a market currently closed to beef exports from Brazil.

“The acquisition of National Beef represents the realization of a unique opportunity,” said Martin Secco, CEO of Marfrig. “With the transaction, we will have operations in the world’s two largest beef markets, will gain access to extremely sophisticated consumer countries and will be able to grow while maintaining rigorous financial discipline.”

The Organization for Competitive Markets (OCM), a watchdog group based in Nebraska, is opposed to the takeover. “With Brazil’s JBS being the largest beef processor, these foreign corporate giants will dominate the U.S. beef market, putting U.S. farmers and ranchers at their mercy,” its statement said.

“Coupled with the lax U.S. meat import policies which allow imported foreign meat to be labeled as ‘product of the U.S.A.’, this will surely guarantee the demise of America’s cattle producers. OCM calls on USDA to immediately change the labeling policy of imported beef.”

According to OCM Executive Director Joe Maxwell, the group is committed in particular to enforcement of U.S. antitrust laws. The National Cattlemen’s Beef Assoc. did not respond to a request for comment. Bill Bullard, CEO of R-CALF USA, a ranchers group, said he is “very much opposed” to Marfrig’s acquisition of National Beef.

Bullard described Brazil is to the U.S. beef industry as China is to U.S. manufacturing. “They have a national policy based on state support to take over the beef trade in the United States,” he said. “We are being treated like a developing country, with their value-added enterprises using our natural resources.

“Our companies are not competing against foreign companies. Our companies are competing against foreign countries.”

Bullard said JBS, a Brazilian firm, tried to buy National Beef in 2008 and was only stopped after 17 state attorneys general filed an antitrust enforcement action to block the merger.

“JBS backed off, but since Marfrig doesn’t have a presence in the United States right now, it isn’t considered an increase in the concentration in the market here,” he said.

R-CALF USA is backing Senate Bill 2098, the Foreign Investment Risk Review Modernization Act of 2017. It would give the committee on foreign investment in the United States more power to review these kinds of issues, Bullard said. He would also like to see food manufacturing included as a national security issue.       

National Beef has a slaughtering capacity of 12,000 head of cattle per day and is headquartered in Kansas City, Mo. It has two slaughterhouses, in Dodge City and Liberal, Kan., and accounts for approximately 13 percent of total U.S. cattle slaughtering capacity.

Once the deal is complete, Leucadia will transfer control to Marfrig and remain a minority shareholder in National Beef, with a 31 percent interest. U.S. Premium Beef, an association of 2,100 American producers in 36 states, will hold 15 percent of National Beef, with other shareholders having the remaining 3 percent.

Leucadia and the other investors have agreed not to sell their shares in National Beef for at least five years.

4/18/2018