Brazilian beef producer Marfrig Global Foods will acquire a 51% stake in Missouri-based National Beef Packing Company for $969 million, creating the world’s second-largest beef processor.
Founded in 1992, National Beef reported sales of $ 7.3 billion in 2017 and since 2011 has been controlled by Leucadia National Corporation, which currently holds a 79% interest.
National Beef has a slaughtering capacity of 12,000 heads of cattle per day and is headquartered in Kansas City. It has two slaughterhouses located in Dodge City and Liberal, Kansas, and accounts for approximately 13% of total US cattle slaughtering capacity.
Once the transaction closes, Leucadia will transfer control to Marfrig and remain a minority shareholder in National Beef, with a 31% interest. The US Premium Beef, an association of American producers, will hold 15%, and other shareholders with the remaining 3%. Leucadia and the other investors have agreed not to sell their shares in National Beef for at least five years.
With the acquisition, Marfrig said it will achieve two key objectives outlined in its strategic plan. First, it consolidates its position in the beef industry, which is the Marfrig’s original core business. A leader in the US beef industry, National Beef exports to 40 countries.
The second key objective the transaction achieves is improving Marfrig’s leverage ratio. Upon closing, Marfrig will consolidate 100% of the results of National Beef. Last year, Marfrig’s total debt corresponded to 4.55 times its Ebitda. With the acquisition, this ratio decreases to 3.35 times.
Other measures to deleverage Marfrig are in place including the decision of selling Keystone Foods, a supplier of food products to the world’s foodservice, retail and convenience, and industrial brands.
Marfrig CEO Martín Secco said: “The acquisition of National Beef represents the realisation of a unique opportunity. 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.”
Marcos Molina, Marfrig Global Foods chairman of the board of directors, added: “The acquisition of National Beef reflects our sustainable growth strategy. From now on, we have become the Brazilian company of the sector with the best financial health, proved into the lowest rates of leverage.”
The key executives of National Beef, including its 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.
Leucadia CEO Rich Handler said: “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.”
Last year, Marfrig announced it would reopen refrigeration units at two of its plants in Brazil, and expand four others, in a move it said would increase capacity by 25%.
© FoodBev Media Ltd 2019