The world’s largest meat company and second-largest poultry processor announced on May 4 that it has signed an agreement to lease the Frangosul chicken-processing plants from the company’s heavily-indebted owner, France-based Doux.
This transaction signals JBS’ entry into the chicken sector in Brazil. JBS is already the largest chicken producer in the US through its ownership of Pilgrim’s Pride. In its press release, JBS noted the importance of having a production platform for chicken in both Brazil and the US as it already has for beef.
According to the agreement, JBS will lease the assets and operate the business, but will not take on any debt, liabilities, liens or other impediments. The 6,000 workers directly employed by Frangosul will be hired and all contracts with its 1,500 contract growers and with service providers will be maintained.
Doux has been operating in Brazil since 1998, when it acquired Frangosul, whose sales now make up almost half the company’s total sales (EUR 1.3 billion in 2010). Frangosul, however, is also responsible for the company’s high level of debt over the past 2 years. In Brazil, Frangosul has been in default of payment to contract farmers, workers and suppliers in the state of Rio Grande do Sul on and off since early 2011. For more details, see Unions in Brazil and France cooperate in addressing the crisis at poultry producer Doux. In April, the company shut down its two processing plants in the state.
In France, Groupe Doux continues to seek a way out of its debt crisis through talks with potential lenders and strategic partners. According to reports, the French state investment fund, FSI, gave up plans to take a stake in Doux after having been kept in the dark about Doux’ agreement with JBS in Brazil.