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Many American meat lovers might not recognize the name JBS, yet they’ve likely consumed products from this giant. The Brazilian meat processing company, the largest worldwide, is now aiming to get American investors to consider its stocks.
JBS provides a significant portion of the beef, pork, and chicken consumed in the U.S., and this dependency goes both ways. Over half of the $77.2 billion in revenue generated last year came from the American market. This strong presence is a major reason why the company has wanted to list its shares in the U.S. After nearly ten years of consideration, JBS has finally received approval from regulators and shareholders to shift its primary stock listing from Brazil to the United States.
The company believes this move will boost its stock price, which currently trades at a significant discount compared to U.S. competitors, and will also provide access to more affordable funding options.
However, not everyone will find these shares appealing. The Batista family, the founders, hold a 48% stake in JBS through their investment firms. The proposed issuance of supervoting shares could give them 85% of the voting power, raising concerns among some investors.
Advisory firms such as ISS and Glass Lewis have urged current holders of JBS’s Brazilian shares to oppose the dual listing, but their advice was ignored. Ongoing environmental issues related to cattle ranching in the Amazon and a bribery scandal that led to hefty fines from the U.S. Securities and Exchange Commission could deter ESG-focused institutional investors.
Even aside from these complications, the meat industry is demanding. Rising costs of grain and cattle are pushing up expenses for meatpackers, and a challenging economy has made it difficult to pass these costs to consumers. While JBS’s revenue for 2024 has grown by 20% since 2021, its profitability has dropped by 50%.
Despite a surge in share prices following the approval for its U.S. listing, JBS is currently valued at just five times its EV to EBITDA ratio. In comparison, Tyson Foods stands at nine times, while Smithfield Foods and Hormel Foods are at seven and twelve times, respectively. A U.S. listing, along with potential index inclusion and reduced funding costs, could help close this valuation gap.
Even so, JBS’s business model relies more on lower-margin beef processing rather than the higher-margin processed food sector when compared to its U.S. rivals. Strategic acquisitions may be necessary to fully bridge the valuation divide; merely changing the stock market listing won’t suffice for Brazil’s beef giant.
pan.yuk@ft.com
