When the news broke last week that Brazilian firm JBS S.A. would take over management of the beleaguered XL Foods plant in Brooks, Alta., one of the first questions that leapt to mind was, what do they know that XL does not?
Why would it take a foreign beef slaughtering company to fix the production issues at this Canadian plant?
Canadian Cattlemen’s Association president Martin Unrau described JBS as having a global reputation as a leader in the beef business. He further said that JBS has “sophisticated knowledge of modern beef harvesting management.”
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Did JBS, via its American arm, have to bring in that sophisticated knowledge to edge the plant closer to a full reopening? Was XL Foods unable to figure it out, even under the watch of food inspectors?
If that is the case, it would mean the processes at XL have been so disastrous the company could not return to productivity under its own policies and procedures. And if so, you have to wonder how that was allowed to happen.
While the surprise announcement of the JBS management takeover is related to XL’s inability to get the plant operational, it’s really all about the money.
Plants of this size cannot stay closed for weeks or months without losing staggering sums.
And JBS is not just a manager. It has an option to buy the plant, as well as other XL assets, for $100 million in cash and shares after the management agreement ends.
XL has been in takeover discussions with JBS for some time, although at deadline, no one was saying for how long. It’s likely, though, on a deal that size, that negotiations began weeks or months ago before the beef recall.
However, the timing of the announcement — as the plant was struggling to reopen — suggests that the deal has been expedited. This is because it is in no one’s financial interest to keep the plant fully or partly out of production — particularly not the Nilsson brothers, owners of XL, or JBS.
It seems pathetic that another company had to step in to save 40 percent of Canada’s beef production. On the other hand, if JBS does have the credentials and the credibility pointed to by industry players, perhaps this is a good a way as any to save XL Foods and its 2,200 jobs.
