Bribery scandal aftermath continues for JBS

SAO PAULO, Brazil (Reuters) — JBS SA will proceed with plans to list a U.S.-based unit when market conditions allow while wrestling with a shareholder revolt over the role of the controlling Batista family in a massive graft scandal.

Chief executive officer Wesley Batista said JBS Foods International Inc. could be listed by the end of next year, once parent JBS finalizes US $1.9 billion in asset sales to cut debt and restore investor confidence.

His remarks came after the Brazilian development bank BNDES, whose investment arm is JBS’ No. 2 shareholder, said it would endorse a civil lawsuit against management and the billionaire Batista family.

The lawsuit alleges that their role in a corruption scheme led to heavy losses in JBS share value.

“It is not a matter of if but when,” he said of the unit’s initial public offering plan.

JBS Foods includes beef brands Swift and Pilgrim’s Pride, among other subsidiaries.

BNDES Participações SA, which has about a 21 percent stake in JBS, will seek Batista’s ouster at a Sept. 1 shareholder meeting.

The lawsuit also targets his brother, Joesley Batista, who is also a board member, former executives and J&F Investimentos SA, which oversees the family’s 42 percent stake in JBS.

In May, the Batista brothers signed a plea deal with Brazilian prosecutors after admitting to bribing 1,900 politicians over the course of a decade. Since then, the brothers have personally negotiated the short-term refinancing of $6.6 billion in JBS debt and the sale of several assets.

Following the plea deal, JBS’s board created a compliance division and hired a former U.S. De-partment of Agriculture official to bolster transparency.

JBS recently reported quarterly net income that was about half the amount forecast by analysts.

Still, earnings before interest, tax, depreciation and amortization rose 30 percent from a year earlier to $1.2 billion, beating an average estimate of $1.08 billion.

According to Thiago Duarte, an analyst with Banco BTG Pactual, results reflected a strong performance of the booming U.S. beef business.

Batista expects margins to return to historical double-digit levels.

JBS is on track to reduce debt faster than investors anticipated. Net debt could drop to 3.5 times annual EBITDA by December, Batista said, noting that those debt levels had not been expected until the end of 2018.

The company is also in advanced talks to sell Moy Park Ltd. in Europe and U.S. unit JBS Five Rivers Cattle Feeding LLC, following the sales of Argentine assets and a stake in dairy producer Vigor Alimentos SA, Batista said.

JBS has also hired lawyers to deal with a potential U.S. criminal investigation of its corporate practices, he said, adding that “none of our U.S. subsidiaries or executives committed any wrongdoing.”


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