JBS' pursuit of dual share listing created dilemma for BNDES

By Luciana Magalhaes and Ana Mano

SAO PAULO (Reuters) - Brazilian meat processor JBS' decision to pursue a U.S. listing has shone a spotlight on its No. 2 shareholder, National Development Bank's (BNDES) investment arm, and whether the company's move clashed with the bank's core mission of fostering Brazilian corporate development.

JBS, the world's biggest meatpacker, moved closer this week to a dual listing that has been in the works for years, sending its shares soaring 18% on Tuesday. The dual listing would provide access to more investors and possibly aid JBS in raising its valuation closer to peers.

Shares were up slightly on Wednesday.

Helping the process forward, the development bank's investment arm, BNDESPar, said it would abstain from voting at a future shareholders meeting on the proposal to list JBS shares on the New York Stock Exchange through a Dutch subsidiary.

Prior to Monday's announcement, market speculation had centered on whether BNDESPar would endorse JBS' global listing strategy, given the development bank's mandate to prioritize Brazilian economic interests.

BNDESPar has been a key JBS stakeholder since 2007, when it helped bankroll a buying spree that saw it acquire U.S. brands such as Swift and chicken processor Pilgrim's Pride, investments touted as part of a strategy of creating "national champions."

While one analyst said BNDESPar's abstention hinted at opposition to the listing, a source familiar with negotiations told Reuters the bank's lawyers worked to craft a deal with controlling shareholder J&F Investimentos that would allow it to stay a major shareholder.

The transaction was designed to avoid BNDESPar having to immediately sell its shares on the market, said the source, noting that the bank will analyze opportunities to sell or buy JBS shares.

Monday's abstention decision by BNDESPar, which owns 20.8% of the shares, effectively punted the decision on approving the dual listing to minority investors. Separately, the BNDES said that J&F, a holding company run by JBS' founding Batista family, which owns 48.3% of the shares, committed to doing the same.

"(The) official JBS statement seems to show that the BNDES was opposed to the dual listing and that the agreement was drawn up in such a way as to expunge the opposing vote that would most likely be cast at the meeting," said Igor Guedes, an analyst with Genial Investimentos, referring to a regulatory filing from JBS communicating the BNDESPar's decision to abstain from voting.

JBS and BNDESPar declined to comment.

SEC APPROVAL

JBS' U.S. listing proposal remains contingent on approval from the Securities and Exchange Commission, with no definitive timeline established for regulatory clearance.

Though the SEC has refrained from public comment on the matter, a source with knowledge of the commission's internal deliberations indicated that regulators view JBS' proposed dual listing structure as viable.

Guedes noted that SEC concerns regarding ownership concentration may also have influenced the agreement between J&F and BNDESPar. The arrangement could signal that the bank would be willing to reduce its position if needed for the listing to be approved, he said.

Leonardo Alencar, an analyst with XP Investimentos, challenged the view that the potential sale of a BNDESPar stake could help the SEC approve the dual listing.

He noted also that the agreement between the two biggest shareholders could prompt other minority shareholders to demand protections similar to those secured by BNDESPar, which was guaranteed compensation of up to 500 million reais ($88.14 million) if JBS shares fail to rise to a certain level following the planned listing. That level has not been made public.

The company's plan has attracted opposition from lawmakers in the U.S. and UK, as well as environmental groups who sent letters to the SEC expressing concerns about the listing based on the company's environmental impact and corruption allegations involving members of the founding family.

($1 = 5.6729 reais)

(Reporting by Luciana Magalhaes and Ana Mano in São Paulo; Editing by Christian Plumb and Rod Nickel)