Rumours of an offer by JBS of $2bn, which would buy Pilgrim’s Pride out of bankruptcy, for which it filed late last year, first surfaced in the Wall Street Journal on Wednesday. If the reports of the deal were correct, John Briggs, an antitrust expert with the law firm Axinn Veltrop Harkrider LLP, said: "I would be very surprised if that ran into any serious antitrust scrutiny.”
However, regulators said the deal would not give JBS enough power in the chicken market to interfere with competition. "Meat is not interchangeable. Beef is a market, pork is a market, chicken is a market," said Andre Barlow, an antitrust lawyer with Doyle Barlow and Mazard.
That is despite the fact that the deal would propel JBS USA to second place in the chicken processing market after Tyson, with an 18% share, and total meat sales of $23.9bn. That would bring it close to Tyson’s US total of $26.9bn.
JBS divestments might be required
That said, antitrust authorities might require selective divestments in JBS’ key areas, said Richard Brosnick, a New York City-based antitrust attorney with Butzel Long: "The exception is that there may be isolated markets. There may be a pocket of the country that these distributors (JBS and Pilgrim's Pride) have 60 or 70 percent of the meat market."
JBS is already the third largest US beef processor, after Tyson, then Cargill, and the third largest US pork processor, after Smithfield, then Tyson.
If the acquisition proceeds, it would be a much-needed boost to the US livestock and poultry industries, which have suffered from high feed and fuel prices and slow sales in the past year.
Because many US firms in the sector had struggled financially, a JBS-Pilgrim’s Pride deal could represent the start of further investment in the industry. Ron Plain, agricultural economist with the University of Missouri, said: "There are a number of livestock and poultry firms that have lost a lot of money and are ripe to buy.”