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South American Marfrig Global Foods acquired 51 percent interest of U.S.-based National Beef in early April, making it the world’s second largest beef producer. National Beef is the fourth-largest beef processor in the United States. Locations like this one in Dodge City, Kansas, are expected to operate normally once the sale is complete. (Journal photo by Kylene Scott.)

South American Marfrig Global Foods acquired 51 percent interest of U.S.-based National Beef in early April, making it the world’s second largest beef producer. National Beef is the fourth-largest beef processor in the United States.

Marfrig has agreed to pay $969 million for the equity interest and, once the transaction is concluded, will become the world’s second-largest beef processor, with consolidated sales of $13 billion.

According to a press release from Marfrig, National Beef reported sales of $7.3 billion last year and has been controlled by Leucadia National Corporation since 2011. Leucadia held 79 percent interest.

Founded in 1992, National Beef has a slaughtering capacity of 12,000 head of cattle per day and is headquartered in Kansas City. It has two slaughterhouses located in Dodge City and Liberal, Kansas, and accounts for approximately 13 percent of total U.S. cattle slaughtering capacity.

Once the transaction closes, Leucadia will transfer control to Marfrig and remain a minority shareholder in National Beef, with a 31 percent interest. U.S. Premium Beef, an association of American producers, will hold 15 percent and other shareholders the remaining 3 percent. 

Leucadia and the other investors have agreed not to sell their shares in National Beef for at least five years.

With the acquisition of National Beef, Marfrig achieves two key objectives outlined in its strategic plan. First, it consolidates its strong position in the beef industry, which is the Marfrig’s original core business. 

 “The acquisition of National Beef represents the realization of a unique opportunity,” Martín Secco, CEO of Marfrig said. “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.”

The second key objective the transaction achieves is improving Marfrig’s leverage ratio. Upon closing, Marfrig will consolidate 100 percent of the results of National Beef.

As a way to deleverage, Marfrig will sell Keystone Foods, and this sale along with the National Beef transaction, will help Marfrig achieve its goal of reaching a leverage ratio of 2.5 times by the end of 2018.

“The acquisition of National Beef reflects our sustainable growth strategy,” Marcos Molina, chairman of the board of directors of Marfrig Global Foods said. “From now on, we have become the Brazilian company of the sector with the best financial health, proved into the lowest rates of leverage.” 

National Beef CEO Tim Klein will continue to manage and remain at the company. Board of Managers of National beef will have nine members—five nominated by Marfrig, two by Leucadia and two by the other minority members. 

“We are pleased to remain a significant shareholder in National Beef and to partner with Marfrig and the company’s management team in its continued development,” Rich Handler, CEO at Leucadia, and Brian Friedman, president of Leucadia, said.

Reuters reported April 17 that four U.S. senators have asked for a review panel as to whether or not Marfrig’s acquisition of National Beef is a threat to the safety of the U.S. food supply. In a letter to Treasury Secretary Steven Mnuchin, Sens. Charles Grassley and Joni Ernst of Iowa, Debbie Stabenow of Michigan and Sherrod Brown of Ohio expressed their concerns about the deal and requested the Committee on Foreign Investment in the United States to review the deal.

“It has become increasingly clear that growing foreign investment in U.S. agriculture requires a thorough review process to safeguard the American food system,” the letter said. 

The Senate agriculture committee has not reached any conclusions about the deal, according to the letter to Mnuchin. It asked him to include the U.S. Department of Agriculture and the Food and Drug Administration in the review of the transaction.

“The increasing trend of foreign investment in our food system should be met with careful scrutiny from the relevant experts in order to safeguard the security of our nation’s food supply,” the letter said. 

For more information visit www.nationalbeef.com

Kylene Scott can be reached at kscott@hpj.com or 620-227-1804.

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