March 13, 2019

Brazilian meat giant Marfrig and its subsidiaries, which are part of U.S. National Beef, have agreed to acquire U.S.-based beef processor Iowa Beef from Sysco in a two-part, $150 million deal.

Under the terms of the deal, Marfrig is to acquire a 51 percent stake in Iowa Premium for $76.5 million, while National Beef is to acquire the remaining 49 percent for the balance of the transaction value. Once complete, the transaction shares in Iowa Premium are to be incorporated into the capital of National Beef.

“The joint investment in Iowa Premium is a great opportunity for National Beef and for us to continue producing high quality beef for our customers. We are happy to be part of this long term journey with Marfrig and the other partners of National Beef,” said Stan Inville, CEO of US Premium Beef.

Marfrig acquired a majority stake in Kansas City, Missouri-based National Beef for $969 million in April of last year. Once finalized, the deal made Marfrig the second largest beef processor in the world, with total sales of $13 billion.

At the time, National Beef not only made Marfrig the world’s second largest processor, it gave the company a significant place in not only the U.S. market, but global markets as well, while also improving its leverage ratio.

National Beef exports to 40 international markets, importantly including Japan and South Korea – two key importers that stopped accepting Brazilian beef imports following an industry scandal that eft J&F Participações (J&F), the holding company of rival processor JBS, agreeing to pay more than $3 billion in fines under a leniency agreement between itself and the Brazilian Federal Prosecutor’s Office.

“The collective investment in Iowa Premium reflects the company’s optimism regarding the U.S. beef market and the long term focus of our partnership with Marfrig,” said Brian Friedman, president of Jefferies Financial Group, a 30 percent partner in National Beef.

Five months after the National Beef acquisition, Marfrig undertook a reorganization and named Eduardo Miron as its new CEO. Miron has previously served in the role of chief financial officer for the group. The company’s new structure involved two divisions: South America, including 31 units in Brazil, Uruguay, Argentina, and Chile; and North America, including National Beef, a beef processing plant in Ohio, and now Iowa Premium.

“We want the two divisions to have independent goals and management, and that we can measure success in each one of them,” said Miron in a conference call at the time.

Located in Tama, Iowa, Iowa Premium has a processing capacity of 1,100 head of strictly Black Angus cattle per day, and sales of $650 million per year.

In connection with the acquisition, Marfrig also has entered into a long-term supply agreement with Sysco, stating that the integration of Iowa Premium is a perfect fit with its “value-based marketing strategy”.

“I am excited to expand our beef operations with a processing facility in Iowa and we look forward to strengthening the relationships with the family farmers who produce the highest quality Black Angus cattle in the U.S.,” said Tim Klein, CEO of National Beef and of Marfrig’s North America operation.

-Lynda Kiernan