Marfrig grows its US beef footprint through National Beef acquisition

10.04.2018

Brazilian meat packer Marfrig has acquired a 51% of the equity in the US-based National Beef business, a deal which makes it the world’s second biggest beef producer. As well as reducing debt, the Brazilian multinational says the move will give it access to new markets in Asia, particularly Japan and South Korea.

Marfrig Global Foods has agreed to purchase 51% of the membership interests in National Beef Packing Company for $969 million. The deal will be funded through a loan from Rabobank. Marfrig had pre-tax earnings of $0.52 billion in 2017 – with National Beef included, its pro-forma EBITDA will increase to $1.0bn on sales of over $13bn.

National Beef was established in 1992 and had 2017 revenues of $ 7.3 billion, making it the fourth largest beef processor in the US. With its headquarters in Kansas City, the company has two slaughterhouses, in Dodge City and Liberal, Kansas, capable of slaughtering 12,000 cattle per day between them, or some 13% of total US cattle processing capacity.

Leucadia retains minority stake

Since 2011 National Beef has been controlled by Leucadia National Corporation which holds a 79% interest. Leucadia will retain a 31% minority shareholding, with the US Premium Beef association of American producers holding 15% and other shareholders the remaining 3%. All parties have agreed not to sell their shareholdings for at least five years.

Marfrig says the move helps it towards two of its key objectives. The first is to consolidate its already strong position in the US beef industry, and lift its exports - National Beef sells to 40 countries, including Japan which is currently closed to beef exports from Brazil.

Leverage ratio reduced

Secondly, the transaction will improving Marfrig’s leverage ratio – in 2017 Marfrig’s total debt was 4.55 times its EBITDA. After the acquisition, the ratio decreases to 3.35 times EBITDA. The company recently divested the Keystone Foods meat product wholesaler as part of its goal to reduce its leverage ratio to 2.5 times by the end of 2018.

“The acquisition of National Beef represents the realization of a unique opportunity,” commented Marfrig chief executive Martín Secco. “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.”


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