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American meat eaters may have never heard of JBS, but they may have sampled the product. Currently, the world’s largest Brazilian meat processor hopes to sample stocks as well.
JBS supplies a lot of beef, pork and chicken that reach American plates, and trust is mutual. More than half of the $77.2 billion revenue drawn into last year came from the United States. That exposure is one reason why the company has long craved a US stock list. After overtaking the idea for nearly a decade, the company ultimately got green lights from regulators and its shareholders to move its major stock lists from Brazil to the US.
The company believes the move will support inventory. The stocks will be significantly discounted by US rivals, received a higher rating, and allow the company to provide cheaper funds.
However, stocks are not something that anyone can taste. The founding Batista family is JBS’s largest shareholder with a 48% stake through its investment vehicle. The planned issue of superimposed stocks offered disproportionately to the Batista family could leave 85% of the votes.
Shareholder advisory firms ISS and Glass Lewis voted against the dual list for JBS’s current Brazilian stock holders. There are long-standing environmental concerns ranging from cattle ranching on Amazon’s rainforest and the bribery scandal in which millions of dollars penalties allowed the Securities and Exchange Commission and Batista brothers to curb stocks from the menu of ESG-oriented institutional investors.
Even without these weirdness, selling meat is a tough business. Grain and beef prices are high, and meat packers are increasing. A tough economy also means that the scope of giving high costs to consumers is more limited. JBS’s revenues rose in 2024, fifth in the number one since 2021, but profitability is 50% lower.
Despite the stock price rising after approval of US listing, JBS is currently trading EVs only five times with EVs. In contrast, Tyson Foods is 9 multiples, with Smithfield Food and Homer Food being 7 and 12 respectively. Potential index inclusion and reduced funding costs should help reduce this valuation gap.
Still, compared to its US rivals, JBS’s business mix is further leaning towards lower margin beef processing instead of higher margin processed foods. The acquisition may help. To close the valuation gap completely, the King of Kings of Brazil needs to change much more than the stock market list.
pan.yuk@ft.com
