HM Capital Partners will sell the US’ third largest meat processing firm, Swift & Company, to Sao Paolo-based J&F Participações in a deal involving $225 million (€167 million) in equity and $1.2 billion in debt.
The $1.4 billion marriage of Swift, founded in 1855, and J&F Participações, Latin America’s largest beef processor, will result in the world’s largest beef and pork processor.
Widely publicised immigration raids at six Swift plants in December – resulting in 1,200 charges against undocumented immigrants – played no role in the private equity firm’s decision to the exit its investment, said HM partner Edward Herring.
Exploratory strategic discussions were “well under way and not impacted at all by the immigration issue in December”, Herring said. HM was approached by “several parties” more than a year ago regarding a possible sale or combination of businesses, he said.
Herring met with management at J&F Participações more than two years ago to discuss “their views on the strategic landscape,” he said. HM frequently meets with competitors and potential partners in various industries to cultivate relationships, he noted.
“I think that relationship really paid off over time as it became apparent that they were very interested in consolidating, not being consolidated,” Herring said. “We were very attracted to the Brazilians’ view of growth rather than just pure corporate consolidation.”
HM currently owns more than 95 percent of Swift, which along with Booth Creek Management, it purchased in 2002 from ConAgra Foods.
“We originally put in $175 million, and took a dividend two years into our investment that got a good majority of our investment back,” Herring said. “So this exit represents a nice return for a four-and-a-half year hold period.”
The transaction is expected to close mid-July. JP Morgan was HM’s financial advisor, while Vinson & Elkins was its legal advisor. Rothschild was J&F’s financial advisor and Greenberg Traurig and Velloza, Girotto & Lindenbojm were its legal advisors.
HM Capital, formerly known as Hicks, Muse, Tate & Furst, is reportedly raising a fund with a target of roughly $1 billion. Herring did not comment on the fundraising, but said the firm’s activities “are continuing. We’re looking at transactions as we speak.”
“The future looks bright for the firm,” added Herring.