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Following an opposition campaign by governance and environmental advocates, the quest by the Brazilian billionaire brothers behind the world’s largest meatpacker JBS JBS’s prestigious Wall Street stock list is on the edge of the knife.
The minority shareholders of the $16.5 billion group, controlled by Wesley and Jawsley Batista, today decide to make a proposal to transfer major stock trading venues from Sao Paulo to the New York Stock Exchange.
JBS says the move should help unlock cheap funds to boost market value and support growth.
“(It) will raise international visibility, attract new investors and further strengthen our position as a global leader in food,” CEO Gilberto Tomazoni said in a revenue call last week.
The long-awaited approval of the deal curtails the comeback of Batista Brothers, whose father founded the company in 1953.
Joesley Batista, one of the brothers behind JBS, the world’s largest meat processor © Evaristo SA/AFP/Getty Images
Through a series of overseas acquisitions, the pair turned their family slaughterhouse business into a multinational giant, and within the next decade they were caught up in a corruption scandal.
But their coveted US listings were questionable Thursday after the early numbers announced by JBS showed that a majority of shareholders (52%) were against the deal.
According to those familiar with the process, the results will come down to shareholders’ meetings on Friday, as around 29% of the votes have not yet been cast.
J&F Investimentos, Batista Holding Entity, which owns 48% of JBS, is on the verge of vote, as well as Brazil’s state development bank Bndes, the company’s second largest shareholder. This leaves around a third of investors in JBS equity to decide.
The leading proxy advisors ISS and Glass Lewis recommend rejecting the dual list, which also includes the Brazilian B3 Blues deposit receipt, as minority shareholders’ voting rights could be diluted.
Under the JBS proposal, the Netherlands-based company will issue Class A and B shares, the latter giving 10 times the voting rights, but will not trade on the exchange. Depending on the shareholders chosen by the shareholders, J&F may have 85% control of the vote.
JBS Processing Facility, Colorado © Andy Cross/Medianews Group/The Denver Post/Getty Images
JBS argues that these changes will encourage future capital growth for the acquisition while ensuring that the company maintains shareholders that are important for its success.
Mason Capital Management, which holds 2.4% of its minority stake, has called on fellow shareholders to support its listing proposal. He accused the proxy advisor of being “ideological and political considerations,” and urged the Securities and Exchange Commission to investigate recent recommendations.
Questions about corporate governance arrangements are not the only controversy that overshadowed JBS’s imposition of the NYSE ticker symbol.
The coalition of environmental activists opposes it due to concerns about deforestation related to cattle ranches in ecosystems, such as Amazon and greenhouse gas emissions from livestock.
“The company’s global expansion plans could push the planet further towards climate collapse,” said Greenpeace’s Christian Mazzetti. “There should be no place in the (JBS) open market.”
JBS rejects these criticisms and highlights its “zero tolerance” procurement policy. This prohibits the purchase of animals from farms involved in deforestation, forced labor, or invasion of Indigenous lands.
The company says sustainable production measures include “state-of-the-art” monitoring and enforcement tools across the supply chain.
Wesley Batista©Evaristo SA/AFP/Getty Images from JBS
Stock investors seem brazenly about JBS’s outlook. Its stock has grown 29% since mid-March, surpassing Brazil’s Bovespa index. Analysts attribute the rally to the possibility of a debut in the NYSE.
HSBC analysts wrote in a memo that the biggest risk faced by the company remains “poor governance”, but the market was already setting prices. JBS argues that dual lists will enhance corporate governance and transparency.
“The investors who own JBS today are very knowledgeable about governance issues and have been going on for years,” said Carlos Lavoy, an analyst at HSBC.
Opponents highlight the issue of corruption in the past. The brothers and several executives confessed to bribe politicians in a plea deal with prosecutors in 2017, and fined him heavily in Brazil and the United States.
The food conglomerate says it has become a page. “JBS implements a robust global compliance system in line with internationally recognized standards,” he added.
U.S. Sen. Elizabeth Warren questioned this week whether the $5 million donation to President Donald Trump’s inauguration was made to “Curry Favor,” the single biggest amount of money that is the supplemental Pilgrim’s Pride for JBS poultry.
“As a US-based food company, Pilgrim has a long, bipartisan history of participating in the civic process,” JBS said.
Additional Reports by Beatriz Langella
