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Brazilian firm to buy Swift for $1.4 billion

Merger called first big foreign stake in U.S. beef business

Published May 30, 2007 at midnight

In a merger that will create the world's largest meat processor, a Brazilian company said Tuesday it will buy Greeley-based Swift & Co. in a deal valued at $1.4 billion.

Sao Paolo-based JBS South America will pay $225 million for Swift stock and $1.2 billion to assume the debt of the closely held company controlled by investors, including Vail's George Gillett.

"Swift should emerge even stronger, and that is good news for our partnership customers, our suppliers and our employees," said Sam Rovit, the company's president and chief executive officer.

The deal, which faces antitrust scrutiny, gives JBS access to the huge Japanese market, which currently bans Brazilian beef because of concerns about mad cow disease.

"It is a major step for our group in establishing a global presence, said Joesley Mendona Batista, chief executive officer of JBS. "More importantly, Swift will provide us with access to the Pacific region."

Linking up with Swift also expands JBS' presence in the United States, the world's largest consumer of beef.

Swift put itself up for bid recently, not long after the financial hit it took when federal immigration agents swept through its U.S. plants in December and removed nearly 1,300 illegal workers.

It reported a loss of almost $50 million when its quarter ended in February.

Earlier this month, it boosted the estimated financial impact of immigration raids, saying the raids could cost the company $45 million to $50 million more in lost earnings and increased expenses in the fiscal year that ended May 27.

Analysts have anticipated a Swift merger since the company first brought in Rovit, who specialized in mergers and acquisitions in his previous role as a consultant.

The privately traded Swift has publicly traded debt. It employs 20,000 workers worldwide. About 2,400 are located in Greeley, including the headquarter ranks and the workers at its beef and lamb facilities.

The company already announced earlier this year it would cut about 70 jobs at its headquarters to save $10 million to $15 million a year.

"From what we know, we should expect no changes in our U.S. operations, and that would include our operations here at Greeley," said Sean McHugh, Swift's vice president of investor relations.

Roughly 9,500 workers at Swift's U.S. plants are represented by labor union contracts.

The buyout offer represents the first significant investment in the U.S. beef industry by a foreign company, according to Steve Kay, editor and publisher of the trade publication, Cattle Buyers Weekly.

"(JBS wasn't) on anybody's radar (in the deal) until just a few weeks ago," Kay said. "This company seems to have paid quite a bit of money . . . and obviously outbid the others."

JBS generated just $1.8 billion in revenues last year vs. the roughly $9.5 billion Swift reported in the most recent 12-month period. But the slaughtering capacity at JBS exceeds Swift's capacity, according to McHugh.

JBS SOUTH AMERICA

Headquarters: Sprawling Sao Paolo, Brazil, South America's largest city.

Ownership: Went public two months ago; stock trades on the Sao Paolo Stock Exchange (Bolsa de Valores de Sao Paolo)

Operations: JBS began in 1953 with a daily slaughtering capacity of five head of cattle before growing into Brazil's biggest beef seller by acquiring slaughterhouses.

Financial: Sales of $1.8 billion last year.

SWIFT & CO.

Headquarters: Outskirts of Greeley, across town from slaughterhouse operations where federal immigration agents rounded up illegal workers last December.

Ownership: Stock privately owned, but debt publicly traded.

History: Named for Gustavus Swift, who founded company in 1855. The Monfort family built the Greeley plant in 1960, selling out to giant Conagra in 1987. The Omaha-based food giant sold a majority stake in the plant to private investors (including Vail's George Gillett) in 2002.

Financial: Revenues about $9.5 billion in fiscal year ended May 28. Posted loss of $182.95 million and had debt of $826.8 million.

Swift takeover deal at a glance

In merger that will create the world's largest meat processor, Brazil's JBS South America will buy Swift & Co. of Greeley for $1.4 billion. Price tag includes $225 million of stock and $1.2 billion in debt.

JBS freely uses the words slaughterhouse and slaughtering on its Web site, terms meticulously avoided by Swift, which instead uses the terms meat processing and meat fabrication.

or 303-954-5068 The Associated Press contributed to this report.

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