Brazil's JBS SA is making progress towards its anticipated stock listing in New York following an agreement with its second-largest shareholder. The investment arm of Brazil's state-owned bank BNDES, holding nearly 21% of JBS, will not cast a vote on the plan during the upcoming board meeting, which is seen as a critical step towards JBS's listing, as per a regulatory filing. The agreement was made with J&F Investimentos SA, the parent company of the world's leading meat producer.
Under the unique arrangement, BNDESPar stands to receive up to 500 million Brazilian reais ($87.9 million) if the anticipated share value increase from JBS's US listing does not materialize, specified in the agreement. Although the exact strike price was not disclosed, both parties stated that it needs to be reached by the second half of 2026.
JBS has made a case that its valuation is currently constrained compared to similar companies like Tyson Foods Inc., Hormel Foods Corp., and its US subsidiary Pilgrim's Pride Corp. due to its absence from the US listings and indices like the Russell 2000 Index and the S&P 500. By having a listing on the New York Stock Exchange, JBS believes it could potentially elevate its market worth to $30 billion from the current $12 billion.
Owned by Brazilian brothers Joesley and Wesley Batista, JBS is valued at 4.3 times its 2024 earnings before interest, taxes, depreciation, and amortization, expected to rise to 4.5 in 2025. Comparatively, Pilgrim's Pride and Tyson have multiples of 6.2 and about 8.5 for the same period, respectively.
Notwithstanding the optimism surrounding a US listing bridging the valuation gap with its competitors, uncertainties persist, especially given the agricultural sector's current challenges and potential trade disputes. Smithfield Foods Inc., the largest pork producer in the US, experienced a stock price decline below its initial public offering price earlier this year due to market conditions.
The agreement with BNDES represents a significant achievement for JBS after pursuing a US listing for over a decade. Previously, BNDES had blocked a restructuring proposal in 2016 that would have involved JBS listing on the NYSE, and also attempted to remove CEO Wesley Batista in the past.