A telling reaction to rumours that JBS could look to hold talks with Smithfield Foods to buy the US business was the slump in the Brazilian meat giant’s share price.
JBS shares fell in the wake of a report in Brazil that it was looking to make further acquisitions – and could target US pork processor Smithfield.
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The fall in JBS’s stock suggested investor concern that the Brazilian meat group could bite off more than it could chew with yet another acquisition.
In the last 18 months, JBS has made a flurry of purchases amid a wave of consolidation in the global meat sector.
Last year, JBS acquired ailing US poultry giant Pilgrim’s Pride and came together with another Brazilian firm Bertin to create a JBS-led meat titan.
JBS has also found time to buy two Australian firms – lamb business Tatiara and beef group Rockdale Beef.
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By GlobalDataThe report in Brazil linking JBS to Smithfield suggested the company wants to strike further deals to stay ahead of local rival Marfrig, which itself has snapped up a number of firms in recent months.
However, an acquisition of Smithfield, which would likely necessitate a hefty price tag, could put pressure on JBS’s balance sheet.
Acquiring Smithfield would significantly expand JBS’s presence in the US and Europe but the business has to beware of over-stretching itself – even if it is concerned about the recent growth of Marfrig.
JBS did not return a call requesting comment, while Smithfield refused to be drawn on what it labelled “marketplace rumours”.
However, with the global meat sector consolidating and with meat processors keen to build scale to serve growing demand for meat in emerging markets, this could be one to watch.
