The chairman of the world’s largest meat producer, JBS, has stepped down, weeks after telling prosecutors his company bribed Brazilian politicians, including President Michel Temer, in exchange for taxpayer-subsidised loans and other favours.
Joesley Batista, the youngest son of JBS’s founder and the architect of its blistering expansion into the US and other international markets, would be replaced immediately by board member Tarek Farahat, the company said.
The resignation deepens the uncertainty around JBS, Brazil’s second-largest non-financial firm by revenue. Over the past 15 years, the company has transformed itself from a relatively unknown firm outside Brazil into the owner of popular US brands such as Pilgrim’s Pride.
The company also supplies meat globally to restaurant chains, including McDonald’s, Burger King, Subway, Outback Steakhouse, KFC and Wendy’s.
“We will work hard to restore trust with the market and protect the more than 235,000 families that are part of JBS,” Mr Farahat said. “There is a significant amount of work to be done in order to regain the trust of our stakeholders.”
Mr. Batista stepped down a week after prosecutors disclosed the contents of a plea deal he and his older brother, JBS CEO Wesley Batista, struck with authorities in April as part of the country’s sprawling anti-corruption investigation.
The company declined to say why Wesley Batista remained CEO. A source said that of the two brothers, Joesley Batista dealt more regularly with Brazilian politicians.
In exchange for being spared jail time, the brothers and other high-level company officials admitted to paying about $US150 million — mostly in bribes — to nearly 2000 Brazilian politicians, including Brazil’s past three presidents, according to the plea deal.
The allegations were a bombshell in Brazil and prompted calls for the ouster of Mr Temer. The Brazilian president has denied the allegations.
“Companies like JBS … were essentially criminal organisations with a corporate facade,” said Paulo Sotero, director of the Brazil Institute at the Wilson Centre.
A fine of 11.2 billion reals demanded of JBS’s holding company by Brazilian prosecutors threatens to drive up the firm’s already-high debt levels, prompting ratings firms Fitch Ratings and Moody’s Investors Service to downgrade its credit rating on May 22.
Brazilian bankers said they were already getting calls from international investors eyeing the assets of JBS and its parent company.
For a company once hailed as a Brazilian national champion and the face of the country’s bright future, the Batista brothers’ testimony laid bare the dark side of JBS’s rise, where cozy ties to politicians gave the company cheap credit and friendly regulation. Billions of dollars in subsidised loans from BNDES, Brazil’s giant development bank, left JBS with a sprawling business empire. The meatpacker’s revenues exploded from $US1.8 billion in 2006 to $US49bn last year.
The Batista family’s holding company, J & F Investimentos — named for Joesley and Wesley’s parents, Jose and Flora — also owns a bank, one of Brazil’s largest dairy brands, a cleaning-products company, a paper and pulp company, a power plant, and Havaianas, the brand of rubber thongs imprinted with the Brazilian flag that are sold around the world.
As it swallowed up competitors, JBS became a virtual monopoly in parts of Brazil’s interior, able to squeeze ranchers for lower prices on their cattle. But unlike US authorities, who blocked JBS’s attempted acquisition of National Beef Packing Co in 2008 on antitrust grounds, Brazil’s government actively facilitated the company’s consolidation at home and abroad.
BNDES loans facilitated the acquisition of Swift Foods in 2007, then the third-largest beef packer in the US. The following year JBS bought Smithfield Beef Group, the nation’s fifth-largest beef packer. And in 2009 it acquired Pilgrim’s Pride, the second-largest chicken processor in the US, as well as one of Brazil’s largest beef firms.
As JBS stormed the international stage, its investors were often bemused by the Batista family’s folksiness.
Pedro Herrera, who covered JBS for years as an analyst for HSBC, recalled a big cocktail party the company held at the Time Warner Center in New York City, many years ago. The analysts and investors all wore nice suits. Joesley showed up in jeans and unshaven.