Fonte: Latin Lawyer
Data: 09 de agosto de 2007
Argentina may be more famous than Brazil for the quality of its steaks, but in terms of quantity, Brazil wins hands down. After acquiring US company Swift, Brazilian meat company JBS is now the biggest beef company in the world.
JBS, already the largest meat processor in Latin America, put the final touches to the US$1.4 billion deal on 11 July, advised by Greenberg Traurig LLP and Velloza, Girotto e Lindenbojm Advogados Associados SC. Ross Kaufmann, who led the Greenberg Traurig team, said the deal’s closing was the culmination of “months of work, starting with due diligence leading to a successful bid at auction”.
The deal has given JBS access to new markets in the US, Asia and Australia, where Swift’s subsidiary, Australia Meat Holdings, is the largest processor of beef in the country. Greenberg Traurig turned to Deacons in Sydney and Clayton Utz in Brisbane for help in this.
Swift was sold by Dallas-based private equity group HM Capital Partners, advised by Vinson & Elkins LLP. HM and co-investor Booth Creek Management received US$225 million in cash, with JBS’s parent, J&F, assuming US$1.2 billion in debt.
As the transaction headed towards closing, all that debt – other than any not prepayable and not repurchased – was refinanced. “On 8 June, Swift announced tender offers for its outstanding notes and consent solicitations to amend or eliminate most of the affirmative and restrictive covenants and certain events of default in the indentures under with the Swift notes were issued,” explains Kaufmann. The successful completion of the swap was announced only on the morning the deal closed.
The bull market
The acquisition and the debt refinancing deals mark the culmination of a carefully planned financing package for JBS. First of all, in March it made a market-beating IPO, raising US$800 million on the local stock exchange.
Pinheiro Neto Advogados landed JBS as a client last year, when it structured a bond issue for the international markets. As a result JBS turned directly to the firm when considering the IPO.
It was the first float of a beef company seen on Bovespa, meaning counsel had to plan all the more carefully, learning about the industry as they went. It was also more difficult to predict the relationship between company and investors post-IPO.
Partner Henrique Lang notes that “the usual challenges of drafting an equity launch for the debut of a new company at Bovespa and completing the IPO were even greater because of timing concerns.” JBS wanted to spin off its hygiene and cleaning division before the launch. As soon as the company’s bondholders agreed to the sale, the IPO request was filed with the securities regulator, the CVM.
“Meanwhile, we had a team working on shareholder matters for the Batista family [the main shareholders in JBS],” adds partner Henry Sztutman. “In other words, we always had more than one team working for JBS in a different part of the deal and if any of the teams failed in finishing its task on time we would not have a fallback.”
The next stage of the financing was initially planned to be split into three – a further equity contribution of at least US$500 million, a new senior secured asset-based revolving credit facility of US$700 million and, finally, US$600 million in cash-pay notes, toggle notes and floating rate notes.
But that plan fell by the wayside, as Ross Kaufmann notes. “All three series of notes were launched into the market, but were withdrawn during the final stage of marketing,” he says. “In parallel, JBS itself launched consent solicitations under its two outstanding issues of Eurobonds.”
But only a couple of weeks before the acquisition closed, this financing structure was replaced with a US$1.6 billion cash escrow account, funded in part by Brazil’s development bank BNDES, as well as by bridge funding facilities. “This bridge funding was provided under five separate loan facilities that were negotiated through the weekend preceding closing, and cash on hand,” continues Kaufmann.
The shareholding and investment arm of BNDES provided US$756 million in June. BNDESPar invested by acquiring JBS shares, for which JBS announced a capital increase of 227 million shares. BNDESPar paid 8.15 reais a share, nearly one real more than the market value at the time.
In total, JBS made a capital increase of US$900 million to finance the Swift acquisition. Pinheiro Neto advised on multiple aspects of the financing, as well as helping JBS get approval from its shareholders of the merger plan structured by Greenberg Traurig and team for J&F.
But Pinheiro’s involvement did not stop there. For while planning and financing the Swift acquisition, JBS also entered into a joint venture worth US$50 million in May with Australian businessman Jay Link, owner of Australian Jerky Snack Brands. Together they will operate Beef Snacks International, selling meat snacks in Latin America and across the world from Holland.
In this transaction, JBS employed the same counsel as it had for the Swift buy, with Pinheiro Neto on the other side, advising Jay Link. A Chinese wall was created within Pinheiro to prevent conflict. “The group of people that was working for JBS could not work for Jay Link and vice versa,” says partner José Carlos Meirelles, who advised Jay Link. “The access to the documentation was also restricted. The measures worked absolutely fine and we did not have any problems with that.”
The global aspect was again the tricky part. “An interesting feature of this 50–50 joint venture was the sophisticated corporate structure developed to address the partners’ concerns and the joint venture’s specific but worldwide needs,” notes Guilherme Leite. “The deal encompassed several different jurisdictions and the ability of the parties to accommodate the legal issues in each country was definitely a key aspect for the success of the negotiations.”
For any company, such a rush of deals and significant global expansion in only a few months might mean a period of consolidation. But despite already being at the top of the pile, this acquisition is only the beginning of JBS’s plans to grow yet further, according to in-house counsel Francisco de Assis. “The Swift acquisition is just the start of our global growth strategy. Many more projects will be implemented in the next three years,” he says.
Assis and his team have built up considerable international experience, opening affiliates in Egypt, Russia, the UK, Japan, South Africa, and Angola, as well as in other South American countries and the US. His plan of action for a new jurisdiction is tried and tested. “The first step is to learn about how the legal system works, for which we need the best law firm to help us and to teach us about that,” he says.
One of the strategies Assis uses is to look for quality beyond the largest firms. “There are lots of different types of law firms in the world, and when you look for one to help your company, you have to choose the best, not the biggest. The best could be a little law firm specialised in exactly the legal matters that you need help with.”
The legal department’s ethos is very firmly that they must own all decisions, understand why they are being taken, and so not relying too much on local advisers.
“We could not take the risk of becoming a law firm’s slaves,” explains Assis. “We have an expression in Portuguese – ‘é o cachorro que balança o rabo’ – meaning it is the dog that wags its tail, and not the opposite. It is a company’s in-house lawyers that have to know what the company is looking for.”
Assis has clearly impressed upon his counsel the need to emphasise the business’s needs. Says Kaufmann: “JBS is a very dynamic group that prizes agility; Francisco says that to his executives ‘law is a business’ that has to accompany the rhythm set by management.”
For the acquisition of Swift
Counsel to JBS
In-house counsel Francisco de Assis e Silva
Brazil
Velloza Girotto e Lindenbojm Advogados Associados SC
Partners Ronald Grant, Alexandre Lindenbojm and Cesar Amendolara
US
Greenberg Traurig LLP
Shareholders Ross Kaufman, Daniel Raglan, Joe Herz, Robert Miller and Cecil Chung, and associates Siobhan Keegan, Steve Glantz and Allison Franklin
Counsel to HM Capital
Vinson & Elkins LLP
Partners Winston Oxley, Mike Wortley, Ken Anderson, David D’Alessandro, Felicia Finston, Chrissi Hathaway, Chris Amandes, Neil Imus, Stuart Johnston, Cathy Lewis, Jim Meyer, and Peter Mims and associates Bryan Hough, Craig Kornreich and Christina Tate
For the IPO
Counsel to JBS
Brazil
Pinheiro Neto Advogados
Partners Henrique Da Silva Gordo Lang, Henry Sergio Sztutman and Ricardo Luiz Becker, and associates Daniela Anversa Sampaio Doria, Eduardo Paoliello, Guilherme Sampaio Monteiro, Fernando Camargo Neto, Cleber Cilli David, and Rodrigo Moreira
US
White & Case LLP
Partner Donald E Baker and associates Miguel Lawson and John Anderson
Counsel to underwriters and deal managers Morgan, UBS Pactual, ABN Amro, Bradesco and Santander
Brazil
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados
Partner Luiz Octavio Duarte Lopes and associate Vanessa Fiusa
US
Clifford Chance LLP
Partner Jonathan Zonis and associates Keneth Barry and Laura Lawson Forbes
For the financing from BNDES
Counsel to JBS
Pinheiro Neto Advogados
Partners Henrique Da Silva Gordo Lang, Henry Sergio Sztutman and Ricardo Luiz Becker, and associates Daniela Anversa Sampaio Doria, Eduardo Paoliello, Guilherme Sampaio Monteiro, Fernando Camargo Neto, Cleber Cilli David and Rodrigo Moreira
US
Greenberg Traurig LLP
Shareholders Ross Kaufman, Daniel Raglan, Joe Herz, Robert Miller and Cecil Chung, and associates Siobhan Keegan, Steve Glantz and Allison Franklin
For the joint venture
Counsel to JBS
In-house counsel Francisco de Assis e Silva
Brazil
Velloza Girotto e Lindembojm Advogados Associados
Partners Ronald Grant, Alexandre Lindenbojm and Cesar Amendolara
US
Greenberg Traurig LLP
Shareholders Ross Kaufman, Daniel Raglan, Joe Herz, Robert Miller and Cecil Chung, and associates Siobhan Keegan, Steve Glantz and Allison Franklin
Counsel to Jay Link
Brazil
Pinheiro Neto Advogados
Partners José Carlos Junqueira S Meirelles, Guilherme Leite and Ricardo Luiz Becker and associates Carlos Cruz Silva, Camilo Gerosa Gomes and Maurício Braga Chapinoti
US
Foley and Lardner LLP
Partners Jamshed Patel and associate Kevin Schulz, and James Stern who is no longer with the firm
Counsel to JBS and Jay Link in Holland
Loyens & Loeff
Partner Gerco van Eck and associates Hélène Verhoeven and Michiel Van Kempen
