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Brazilian-controlled company moving ahead with XL Foods takeover

Cattle in pasture beside XL Foods' Lakeside Packers plant at Brooks, Alberta on Monday, Oct. 1st, 2012, 2012.

LARRY MACDOUGAL/THE CANADIAN PRESS

After months of weighing whether to buy an Alberta slaughterhouse at the centre of an E. coli outbreak last year, a Brazilian-controlled company announced Wednesday it is moving forward with the takeover.

JBS USA, a subsidiary of Brazil-based JBS S.A., was given the exclusive option to buy the XL Foods beef-processing plant in Brooks, Alta., when it took over management of the troubled facility in October. In a statement Wednesday, JBS USA said it plans to close the deal Jan. 14. It will run the plant under its new Canadian subsidiary, JBS Food Canada.

"After several months of careful consideration of the option and nearly three months of successfully managing the Lakeside facility, we have determined that the Canadian operations will serve as an important asset to our strategic global beef production model," JBS USA president Bill Rupp said the statement. "We look forward to partnering with Canadian producers to deliver quality Canadian beef to customers around the world."

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The deal gives JBS a significant foothold in the country. The Brooks plant is one of the Canada's largest beef-processing facilities, employing about 2,200 workers and slaughtering up to 4,000 cattle a day.

JBS will also get its hands on XL's other Canadian assets, including an old beef-packing plant in Calgary and a feedlot and about 3,045 hectares of farmland near Brooks. Normally, foreign ownership of rural land is limited to eight hectares in Alberta, but the provincial government last month waived its foreign-ownership land rules for JBS because it deemed the takeover offered economic benefits to the province.

Alberta Agriculture and Rural Development Minister Verlyn Olson said the JBS takeover is "very good news" for the province, Canadian beef producers, plant workers and the community of Brooks.

"This purchase is the next and very important step, in what has been a very long process," Mr. Olson said in a statement. "We all continue to focus on ensuring safe food products remain available to all markets."

JBS will pay Edmonton-based XL Foods $50-million (U.S.) in cash and $50-million in JBS S.A. shares for the Brooks plant and other XL properties in Canada and the United States. XL, a privately held company, paid $145-million to buy the Alberta slaughterhouse, feedlot and farmland from Tyson in 2009, according to documents submitted to the U.S. Securities and Exchange Commission.

JBS said it's awaiting a regulatory review from U.S. authorities before exercising the option to buy XL's American operations. The company will not assume XL's debt or liabilities, JBS noted in its statement.

XL Foods had its operating licence suspended in September by the Canadian Food Inspection Agency after tainted meat products were shipped to more than 20 countries. In Canada, it was the country's largest-ever beef recall. At least 18 people were sickened with potentially deadly E. coli O157:H7, which was traced to meat handled at the XL plant. No one died.

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The plant, which was allowed to resume operations in late October, took a huge revenue hit during the shutdown. XL is also facing legal action from some of the people who fell ill.

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About the Author
National news reporter

Renata joined The Globe and Mail's Toronto newsroom in March of 2011. Raised in the Greater Toronto Area, Renata spent nine years reporting in Alberta for the Calgary Herald and the Edmonton Journal, covering crime, environment and political affairs. More

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