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A quest by the Brazilian billionaire brothers behind the world’s largest meatpacker JBS for a prestigious Wall Street stock listing is on a knife edge, following an opposition campaign by governance and environmental advocates.
Minority shareholders in the $16.5bn group, controlled by Wesley and Joesley Batista, will today decide on a proposal to transfer its primary share trading venue from São Paulo to the New York Stock Exchange.
JBS says the move should help boost its market value and unlock cheaper funding to aid its growth.
“[It] will enhance our international visibility, attract new investors and further strengthen our position as a global leader in food,” chief executive Gilberto Tomazoni said on an earnings call last week.
Approval of the long-awaited transaction would cap a comeback for the Batista brothers, whose father founded the company in 1953.
Through a series of overseas acquisitions the pair transformed their family’s slaughterhouse business into a multinational giant, before becoming engulfed in a corruption scandal less than a decade ago.
But their coveted US listing was in doubt on Thursday after an early count released by JBS showed a narrow majority of shareholders — 52 per cent — against the transaction.
With about 29 per cent of votes yet to be cast, according to a person familiar with the process, the outcome will come down to Friday’s shareholder meeting.
J&F Investimentos, the Batista holding entity that owns 48 per cent of JBS, is abstaining from the vote, as is the company’s second-largest shareholder, Brazil’s state development bank BNDES. This leaves the decision to investors with around one-third of JBS equity.
Leading proxy advisers ISS and Glass Lewis have recommended rejecting the dual listing, which would also include depositary receipts on Brazil’s B3 bourse, because of a potential dilution in the voting power of minority shareholders.
Under JBS’s proposals, a Netherlands-based company will issue class A and B shares, the latter with 10 times voting power but not traded on exchanges. Depending on which shareholders choose, it could result in J&F controlling as much as 85 per cent of votes.
JBS argues these changes will facilitate future capital increases for acquisitions while ensuring the company keeps a controlling shareholder critical to its success.
Mason Capital Management, which holds 2.4 per cent of minority shares, called on fellow shareholders to back the listing proposals. It accused the proxy advisers of “ideological and political considerations” and urged the US Securities and Exchange Commission to investigate their recent recommendations.
Questions over corporate governance arrangements are not the only controversy to have overshadowed JBS’s push for a NYSE ticker symbol.
A coalition of environmental activists opposes it due to concerns about deforestation linked to cattle ranching in ecosystems such as the Amazon and greenhouse gas emissions from livestock.
“The company’s plans for global expansion threaten to push the planet further towards climate breakdown,” said Cristiane Mazzetti at Greenpeace. “[JBS] should have no place in the public markets.”
JBS rejects these criticisms and stresses its “zero tolerance” sourcing policy, which prohibits the purchase of animals from farms involved in deforestation, forced labour or invasion of indigenous lands.
The company says its sustainable production measures include “state-of-the-art” monitoring and enforcement tools across its supply chains.
Equity investors appear bullish on JBS’s prospects: its shares are up 29 per cent since mid-March, outperforming Brazil’s Bovespa index. Analysts attribute the rally to a possible debut on the NYSE, which they believe could close a valuation gap with peers.
HSBC analysts wrote in a note that the biggest risk the company faced remained “poor governance” but that the markets had already priced it in. JBS insists the dual listing will strengthen its corporate governance and transparency.
“Investors who own JBS today are very well-informed about the governance problem and have been for years,” said Carlos Laboy, an analyst at HSBC.
Opponents have also highlighted past corruption issues. The brothers and several executives confessed to bribing politicians in a 2017 plea bargain with prosecutors, leading to hefty fines in Brazil and the US.
The food conglomerate says it has turned a page. “JBS has implemented a robust global compliance system in line with internationally recognised standards,” it added.
US Senator Elizabeth Warren this week questioned whether a $5mn donation to President Donald Trump’s inauguration by JBS poultry subsidiary Pilgrim’s Pride, the single largest sum received, was made to “curry favour” with the administration.
“As a US-based food company, Pilgrim’s has a long bipartisan history of participating in the civic process,” said JBS.
Additional reporting by Beatriz Langella