Brazil’s BNDES Rakes In $472 Million With Sale of JBS Stake

(Bloomberg) -- Brazil’s development bank began to unload its JBS SA holdings as shares of the world’s largest beef producer trade near their all-time high. 

BNDES, as the state-owned lender is known, sold about 70 million shares at 38.01 reais each in a block trade at the Brazilian exchange on Thursday, raising almost 2.7 billion reais ($472 million), people familiar with the matter said, asking not to be identified because the matter isn’t public. The auction was handled by Bank of America Corp.

The amount of shares is equivalent to about 12% of BNDES’s stake in JBS. The price represented a slight discount to Wednesday’s closing price of 38.19 reais. 

The sale comes amid expectations of declining profits in the company’s U.S. operations. Beef margins in the U.S. are falling more quickly than expected on rising cattle costs and falling wholesale beef prices, pressuring meatpackers shares recently. Still, JBS shares have surged more than 60% this year and are trading near an all-time high.

JBS had been seen by analysts as a likely buyer in an eventual BNDES’s divestment given it has an active buyback program. 

The firm’s management sees buybacks as a “valuable capital allocation option” considering the discount JBS trades to peers, Banco BTG Pactual analysts led by Thiago Duarte wrote in a report dated Dec. 9, following a meeting with the firm’s Chief Financial Officer Guilherme Cavalcanti. 

For BNDES, the move is part of its broader plan to exit investments in publicly-traded companies to replenish state coffers. Under Chief Executive Officer Gustavo Montezano, the lender has sold stakes in firms including state-owned Petroleo Brasileiro SA, pulp maker Suzano SA, miner Vale SA and paper-packaging producer Klabin SA.

Last October, BNDES scrapped a plan that focused solely on selling JBS shares through a follow-on offering as it wanted the flexibility to pursue a block trade deal or sell the stock in the market, people familiar said at that time. 

The meatpacker declined to comment on the block trade, which was first reported by Brazil Journal. BNDES didn’t immediately respond to a request for comment. BofA confirmed it handled the deal, without any further comment.

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