A Brazilian-controlled company is taking over operations of the Alberta meat-packing plant at the centre of an E. coli outbreak and the largest beef recall in Canada.
JBS USA, a subsidiary of Brazil-based JBS S.A., announced in a news release Wednesday night that it has reached an agreement with Edmonton-based XL Foods to take over management of the Canadian company's Lakeside slaughterhouse in Brooks, Alta.
The biggest shareholders of JBS S.A. are its founding family and the Brazilian government. Its U.S. arm will run the Canadian plant. JBS USA also has been given the exclusive option to buy the troubled plant and several other XL properties.
The XL plant's licence to operate was suspended Sept. 27 after tainted beef products were exported to more than 20 countries, including the United States, a major consumer of Canadian beef. At least 15 Canadians in four provinces fell ill with E. coli O157:H7 after eating meat processed by the XL plant.
XL Foods, a privately held company, is the second-biggest meat packer in Canada. Last week, the Canadian Food Inspection Agency (CFIA) gave the company the go-ahead to resume limited operations. The agency has assured the public that no meat would leave the slaughterhouse until it was proven safe for consumption.
In a statement, XL co-CEO Brian Nilsson said the management agreement with JBS is "another positive step to relicensing" the Lakeside plant.
"We welcome the assistance of JBS and their resources," he added.
The management agreement gives JBS the option to purchase the Lakeside plant as well as XL's beef-packing operations in Calgary and the U.S. A feedlot and farming operation near Brooks are also on the table. If the purchase agreement goes ahead, JBS USA would pay $50-million (U.S.) in cash and $50-million in JBS S.A. shares.
"As the world's largest producer of animal protein, we know full well the commitment it takes to manage world-class operations that produce safe and nutritious products for consumers around the world to enjoy," Bill Rupp, president of JBS USA Beef, said in a statement. "We believe our experienced team will prove an invaluable asset in the management of XL Lakeside and we look forward to exploring our options to purchase XL assets in the near future."
The union representing XL's 2,200 workers welcomed the news, saying Nilsson Bros. Inc., which owns XL, wasn't in a position to, by themselves, get the plant back on its feet. The CFIA's review of the Lakeside plant had ground to a halt over the weekend after the company temporary laid off its workers. The workers were recalled only to be laid off again on Wednesday.
"Normally I'd be opposed to foreign management … but you know I think this goes a long way for the survival of the plant. I'm not sure under the Nilsson Bros. it would have survived," said Doug O'Halloran, president of the United Food and Commercial Workers Local 401.
In a statement Wednesday evening, Agriculture Minister Gerry Ritz welcomed the "private business decision," saying it won't affect food inspection at the shuttered plant.
"Canadian consumers can be assured that the Canadian Food Inspection Agency will enforce the same rigorous food safety standards at Lakeside facility regardless of the management," Mr. Ritz said in a written statement released by his office. "I look forward to receiving their report which will outline the next steps for this facility," he added.
The management change caught everyone off guard, including the Alberta government. A spokeswoman for Agriculture Minister Verlyn Olson said the province views it as a good deal.
"From Alberta's standpoint, this is positive news in the efforts to have the plant re-certified, re-opened, the employees back at work, animals moving through the plant and product moving to consumers," Cathy Housdorff said in an e-mail. The CFIA said the deal between XL and JBS won't affect its continuing inspections or the timeline for the plant's reopening.
"The CFIA's decisions have been and continue to be based on scientific evidence and a precautionary approach to protect consumers," the inspection agency said in statement. "… Any change in management or ownership at XL will not affect our assessment."
JBS USA's parent company, JBS S.A., is a huge meat multinational known for its voracious appetite for acquisitions. Its biggest shareholders are its founding family and the Brazilian government, whose development bank has boosted its share in the company to almost a third to aid its expansion ambitions.
José Batista Sobrinho began in 1953 with a one-man slaughterhouse; now he and his six children share a stake in the company. Other purchases of troubled companies include Swift & Co. and Pilgrim's, both in the United States.
When a wave of purchases saddled the company with $6.9-billion in debt as of 2011, the development bank came to its aid with an injection of cash that almost doubled its ownership stake, from 17 per cent to 31 per cent (it now controls about 30).
The Canadian Cattlemen's Association said JBS's management takeover of Lakeside "establishes credible intentions for resumed operations at the plant."
"JBS has a global reputation as a leader in the beef business," the association's president Martin Unrau said in a statement. "Their sophisticated knowledge of modern beef harvesting management as well as extensive worldwide beef marketing network will be a valuable asset for the entire Canadian beef sector."