JBS Takes Over Lakeside!

[ASRG]

They just announced JBS will take over management of Lakeside Brooks and Lakeside Calgary...with an option to buy!
JBS is from Brazil and has a bad reputation for predatory business practices.
Look out Cargill....you're about to get some real competition!

[cpallett]

http://www.stockhouse.com/news/usreleasesdetail.aspx?n=8642611

JBS takes over management of Lakeside with an option to purchase.

"As part of the agreement, JBS USA holds an exclusive option to purchase XL properties including: the Lakeside beef packing plant; a beef packing plant in Calgary, Alberta; a feedlot in Brooks, Alberta, and the adjacent farmland acreage; a beef packing plant in Omaha, Neb.; and a beef packing plant in Nampa, Idaho. Upon exercising the exclusive option to purchase the above assets, JBS USA agrees to pay USD $50 million in cash and USD $50 million in JBS S.A. shares. Under no scenario will JBS USA assume any of XL Foods' debt or liabilities."

Doesn't take a rocket scientist to figure out that the option to purchase will only be exercised if and when the CFIA gives Lakeside the green light to reopen.

And you folks think the Nilsson brothers play hardball. Looks like a fire sale from here, especially with the plant in Nebraska thrown in.

[InAHurry]

JBS - a purchase that may not have been approved .... without the Nilsson's go-a-round; using decreased slaughter capacity, laid off employees, ... and the spin-offs (Brooks economy, feedlot fats held hostage, heading into fall run) etc etc.

[grassfarmer]

I'm a little surprised by this move although there were
indications before Nilssons took over Lakeside that
Swift were interested. I always thought that if the
Competition Board had stalled the XL takeover this
may have come into play back then.
At least these guys know the business and are
ambitious. The fact they see an opportunity here is a
little bit encouraging after the talk of going down to
only one packer with our reduced cattle population.

[rkaiser]

Encouraging for those who simply want nothing to
do with a sustainable long term vision of the cattle
industry in our country i guess. Encouraging if you
are almost ready to exit the industry or have simply
decided to trust the multinationals to feed the world,
implants, antibiotics, ractopomine and all. It may
turn out to be a well planned move by all involved
imho, however it has affected a lot of consumers
and there is still hope that we can use that
momentum to garner support for our non
commodity plant.

[rkaiser]

Sorry in a hurry. This dam tablet chooses some
words for me and i can't seem to change them . I
referred to you as imho in my post.

[ALLFARMER]

Lakeside purchased in 2009 for 145 million now 3
years later sells with all the other plants included
for 100 million???

It also says JSB not assuming Nillson Bros debts.

Randy you still sure you want to be a plant
owner?

[ASRG]

Not sure how Nilssons are going to make out on this deal....I think the Alberta government had given them a $107 million dollar loan......maybe stiff the Alberta government?
JBS bought Swift, National Beef(a co-op), and Smithfield Farms, all in the USA making it the biggest packer in North America. It has a large presence in Australia and Argentina.
It owns Five River Cattle Feeding with a one time capacity of 900,000 head according to their website. It owns feed companies, a tannery, and even a bank to provide loans for other feedlots.
Have no fear though! Gerry Ritz says "JBS will be held to the same rigorous inspection standards as XL was, by the CFIA!".....well....that sure is a relief! LOL

[grassfarmer]

I thought the union boss at Lakeside summed it up
pretty well
"I’m not normally in favour of foreign control and
ownership, but the Nilsson brothers were in over their
heads,” O’Halloran said.
“They can go back to running their ranches (I'd
substitute auctions here) now and leave the operation
of this plant to someone who knows what they’re
doing"

As for how much Nilssons lose on the deal - who
cares? they took enough money of ranchers, feedlots
and taxpayers over the years. They still had 2
payments left to Tyson on the plant anyway so it's not
like they even paid for it all.

[rkaiser]

You nailed it GF. Doing the math would be futile. Bottom line is that we do have a competitor for Cargill and the commodity beef industry will survive. Fine - still leaves room for the value chain gang and the growing support from producers who are not that excited about supporting this newly resurrected multinational top end model. Unreal who is coming together on this one folks! And good for folks that don't. Gonna be an exciting week.

[ASRG]

We'll see how the union boy likes them when the contract comes due, or maybe when they finally shut the doors?
$100 million for three plants? Brooks, Nebraska, Idaho....why do I get the feeling probably the Nebraska and Idaho plants were what they really wanted?...they really don't like much competition? $50 million a plant and throw Brooks in the garbage can?

How can you buy a business and not assume the debts and liabilities?

JBS are no angels. You don't become the biggest packer in the world by acting like a choirboy!

They are probably licking their lips thinking of how they are going to screw the idiots in the Alberta and Canadian governments.

But don't worry Jerry Ritz and Alison Redford will have our backs!

[cpallett]

I wouldn't count on Lakeside reopening just yet. As ASRG points out, JBS is the biggest player in the US and will be picking up two more US packing plants on this deal.

The main point of the recent CAPI report is that our beef balance of trade with the US has dropped to almost zero from $1.4B in 2002.

Given that processing is cheaper in the US combined with the state of the Canadian dollar, maybe JBS's long term plans include mothballing Lakeside just as soon as they get XL's customers on board. After all, the big retailers could care less where the beef comes from, and JBS is in the game to maximize profits.

All of this brought to you without the public scrutiny that would normally accompany such a takeover.

ASRG, it is called an 'asset sale'. JBS is buying the plants and the land they are sitting on, not XL Foods itself. That way XL Foods retains the debts and all other liabilities (including the lawsuits), while JBS gets clear title to the plants.

[ASRG]

Thanks Cam
I guess the creditors and people sueing would have to go after XL Inc. then?
Could they go after Nilsson Brothers Inc. as well?
Why do I get this feeling Nilssons are going to slide out the back door on this one?

[cpallett]

Yup, they will have to go after XL Foods Inc.

The cornerstone of corporate liability is that it is limited to the corporation itself and does not flow over to the owners, directors or shareholders except in very unusual circumstances.

[kato]

Since this all started, everybody here has always said that there was more to this thing than what we were being told. This answers a lot of questions.

Why no public apology or effort to make things right? Because they were going away anyhow.

Why so difficult to find someone in charge at XL to ask questions of? Because they were all in meetings with JBS.

Why no public inquiry? Because they were going away anyhow. And it looks like the politicians were in on this one.

Why was our so called Ag Minister so elusive? Because he knew all about this deal.

I'm happy that there won't be a total shutdown of the plant right away, but I'm worried about the future.

Have we jumped out of the frying pan and into the fire? I guess time will tell.