Corporate Finance

Mexican Group Buys Vigor for $5.8 Billion Reais

The deal also includes 50% of Itambe, in a partnership with the Central Cooperative of Rural Producers of the state of Minas Gerais. Itambe is a dairy company in which Vigor  has held 50% since 2013.

The deal also includes 50% of Itambe, in a partnership with the Central Cooperative of Rural Producers of the state of Minas Gerais. Itambe is a dairy company in which Vigor  has held 50% since 2013.


Grupo Lala are to pay $5.8 billion reais for  Brazilian food and dairy company Vigor. The information was reported by an anonymous inside source, who claims the contract is yet to be signed, but that both parties have agreed with its terms  and are expected to sign the document in a matter of days.

 

About Vigor:

With headquarters in Sao Paulo, Vigor is the sixth largest dairy company in Brazil.. Founded in 1953, the company has seven industrial units across the country and registered  revenue of $6 billion dollars in 2016. Before being purchased by Lala, Vigor was a property of the troubled JBS group.

 

Legal problems:

The sale of Vigor is part of JBS’s strategy to raise funds to pay for a fine of $10.3 billion reais, which must be paid within 25 years. This sentence occurred because of the Lava Jato operation in Brazil, which aims to combat corruption in the country. The CEOs of JBS group, Wesley and Joesley Batista, were found guilty of bribing authorities to give advantages to the companies they operate, leading to a jump in the profits of the group. In 2006, company profits were in the order of $4 billion reais, but ten years on had increased to around $170 billion. The sell off of assets comes as a necessity, in order to pay for the fine handed by the Brazilian government.

 

The sale of Vigor was originally projected to reach the $6 billion reais range but due to the need to make money quickly, the owners settled for a smaller amount. Grupo Lala announced its intention to purchase Vigor last year, when the company submitted a proposal that competed against the French group Lactalis and the American Pepsico for Vigor.

 

About Lala:

It is the only dairy company with a nationwide presence in Mexico. In 2016, it registered  profits of approximately $3 billion dollars. It has 22 factories, 34,000  employees, and operations in Mexico, the United States and Central America.

 

Last year, Lala registered a growth of 11% in its sales, while it grew 18% in the first quarter of 2017 and 16% in the second. According to a report for investors, the increase occurred due to the integration of the international operations of the Mexican group. 

 

What the future holds:

JBS is planning another sale of its assets. The group announced negotiations for the Moy Park slaughterhouse in Ireland, which is one of the largest in Europe. Specific players were not mentioned, but JBS claimed to have received offers from groups in England, France and China. They are competing to purchase the asset that has an estimated value of $1 billion dollars. The aim is to analyze the offers and announce the winning proposal by October.

 

Moy Park was purchased by JBS from another Brazilian group, Marfrig, in June 2015, for $1.5 billion dollars. At the time, JBS had made the purchase aiming to strengthen the expansion of the group in Europe.

 

C.S.

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