Marfrig Global Foods, Brazil, acquired 51% of the membership interests in National Beef Packing Co., LLC, Kansas City, Mo., for $969 million.
Since 2011, National Beef has been controlled by Leucadia National Corp., New York, which currently holds a 79% interest. National Beef maintains a slaughtering capacity of 12,000 heads of cattle per day out of its two slaughterhouses in Dodge City and Liberal, Kan.
Once the transaction closes, Leucadia will transfer control to Marfrig and remain a minority shareholder in National Beef, with a 31% interest. U.S. Premium Beef, a Kanas City, Mo.-based association of American producers, will hold 15% and other shareholders with the remaining 3%. Leucadia and the other investors will not 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 Marfrig’s original core business. National Beef exports to 40 countries, including Japan.
“The acquisition of National Beef represents the realization of a unique opportunity,” says Martín Secco, chief executive officer of Marfrig. “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% of the results of National Beef.
Other measures to deleverage Marfrig are in place, including the selling of Keystone Foods, West Chester, Pa. This sale, together with the National Beef transaction, should 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," says Marcos Molina, chairman of the board of directors of Marfrig Global Foods. "From now on, we have become the Brazilian company of the sector with the best financial health, proved into the lowest rates of leverage."
The key executives of National Beef, including its chief executive officer Tim Klein, will continue to manage and remain at the company. The board of managers of National Beef will consist of nine members, five of which will be 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,” says Rich Handler, chief executive officer at Leucadia, and Brian Friedman, president of Leucadia.