By Ana Mano
SAO PAULO (Reuters) -The U.S. financial regulator’s approval last month of a proposal by the world’s largest meatpacker JBS to list on the New York Stock Exchange is drawing strong criticism from climate and animal rights groups but praise from Wall Street.
In multiple statements after April 22, when Brazil’s JBS said the U.S. Securities and Exchange Commission (SEC) greenlit its dual-listing plan to broaden its investor pool and raise its valuation closer to peers, environment activists and animal rights lobbies have unleashed a campaign condemning it.
They cited sprawling criminal investigations into JBS or its controllers in Brazil and in the U.S., as well as concerns over the deforestation of the Amazon and the company’s outsized role as a large global emitter of greenhouse gases in the course of its operations.
“Given the company’s long rap sheet of illegal and corrupt conduct, it’s hard to see how the SEC could have confidence that JBS won’t deceive U.S. investors,” Glenn Hurowitz, CEO of Mighty Earth, a Washington D.C.-based advocacy group, said in a statement.
JBS was deeply implicated in a bribery scandal in 2017 that shook Brazil’s political and economic landscape. In the U.S., the company or related parties were fined millions of dollars in 2020 for corruption in Brazil and for bribery related to its 2009 acquisition of Pilgrim’s Pride, another top U.S. meat company.
U.S. lawmakers have also raised concerns over the listing and JBS’s criminal and environmental track record.
The SEC did not respond to several requests for comment.
JBS said it believes its U.S. listing presents a compelling investment option and increased opportunities for farmers and ranchers, employees, consumers and the communities where it operates.
The company, which partly funded its aggressive global expansion by issuing bonds traded internationally, pointed out that it has been subject to the information and reporting requirements of the U.S. Securities Exchange Act of 1934 and other U.S. federal securities laws for years.
Global Witness, a London-based organization which investigates industries’ links to climate change, called SEC’s approval of the listing “a disaster” for both the planet and its people. Other groups have alleged that JBS purchases cattle grazed on deforested areas of the Amazon.
In a statement to Reuters, JBS rejected that claim, citing a “rigorous, zero-tolerance agricultural commodity sourcing policy with strong anti-deforestation measures.”
But climate activists are unimpressed.
“Allowing it to list on the world’s largest stock exchange —unlocking vast opportunities for expansion and profit— shows the deep failures of the U.S. financial regulatory system,” Global Witness said.
SUPER VOTING SHARES
This year, JBS stock rose some 24% on the Sao Paulo Stock Exchange on expectations that the SEC would approve the U.S. listing, something the company has been seeking in various forms since 2009. The company announced the structure of the current listing proposal in July 2023.
For Brazilian investment bank BTG, access to a larger pool of investors after listing in the U.S. would offer JBS “unprecedented firepower to drive growth.”
Citi and other banks have repeatedly said the move will close a valuation gap with rivals, like Tyson Foods.
Under the plan, the meatpacker’s shares will be primarily listed in New York through a Netherlands-based company, but the stock will also continue to trade in Sao Paulo via Brazilian Depositary Receipts (BDRs), which are certificates representing shares of foreign companies traded in Brazil.
JBS NV, the Dutch company created for the dual listing, will issue Class A and Class B shares. The Class B shares will have 10 times the voting power of Class A shares, and only Class A shares will be publicly traded.
All shareholders will be able to convert Class A into Class B shares through December 2026. That will define JBS’ final free float on the NYSE and voting power distribution.
On May 23, an extraordinary assembly of JBS shareholders will vote on the dual listing plan. JBS’ second largest shareholder, the equity arm of Brazil’s development bank, BNDESPar, said it would abstain from voting.
JBS shares could start trading on the NYSE as soon as June.
After all steps are complete, the controlling shareholders could end up with 85% of voting power in one potential scenario, said Genial Investimentos, a Sao Paulo-based investment firm.
Global Witness said such power concentration would limit opportunities for minority shareholders to steer the company on environmental, social and governance (ESG) issues.
(Reporting by Ana Mano and additional reporting by Luciana Magalhães in São PauloEditing by Emily Schmall in Chicago and Marguerita Choy)
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