JBS may lose its poultry slaughterhouse at auction

JBS SA may lose one of its poultry slaughterhouses, which is under dispute at the moment between the former owner, French poultry producer Doux SA and US based Oppenheimer.

Oppenheimer has been awarded ownership of the plant in Passo Fundo in southern Brazil to pay off part of a loan it made to Doux’s Brazilian unit, Doux Frangosul SA, in 2008 and now plans to sell it at auction.

Oppenheimer must now make two attempts to sell the plant through a court-mandated auction process. The minimum price for the first auction is expected to be about 75 million reais ($34 million), based on a valuation of 25 million reais for the building and 50 million for the equipment. If the first sale fails, a second auction will be held within 30 days

That means JBS will have to join the bidding to purchase the plant outright or risk having to renegotiate with a new owner. It also might lose it altogether.

The legal process had been started earlier this year by investment funds Oppenheimer and ING Partners, which had lent French processor Doux’s Brazilian subsidiary Frangosul US$100 million. Of that amount, more than US$73.8 million had not been paid back when Frangosul stopped operating, and began leasing assets to JBS.

JBS leased the plant from Doux Frangosul in 2012, as part of a broader deal in which JBS took over all of Doux’s units in Brazil under a 10-year contract, with an option to purchase. JBS is betting heavily that demand for chicken meat will surge in coming years, as large swaths of the developing world become richer

The plant in Passo Fundo will now go to auction on October 10, according to legal representatives of the investment funds.

Oppenheimer must now make two attempts to sell the plant through a court-mandated auction process. The minimum price for the first auction is expected to be about 75 million reais ($34 million), based on a valuation of 25 million reais for the building and 50 million for the equipment. If the first sale fails, a second auction will be held within 30 days.

JBS and Doux Frangosul are also the targets of another lawsuit by the two investment funds, which challenges the validity of JBS’ lease contract for the Passo Fundo plant. The lease allowed JBS to rent the property for 10 years, with an option to purchase all the Frangosul assets controlled by Doux in Brazil.