Brazil’s JBS Readies Share Exchange, Vigor IPO

Brazilian meatpacker JBS plans to launch an IPO for Vigor Alimentos, its dairy subsidiary, and to exchange JBS stock held by its own shareholders with newly issued Vigor shares. The company has filed the IPO and the voluntary tender offer plans with Brazil’s market regulator CVM. JBS argues the move will unlock value at its dairy unit which, based on comparable companies, should trade at higher multiples than JBS shares. JP Morgan advised on the exchange offer, but it remains unclear whether the bank will be mandated for the IPO. JBS board members are expected to meet once again to determine the valuation for Vigor and the offer’s exchange ratio. An appraisal report conducted by Bradesco BBI and made public by JBS, calculated Vigor’s equity value measured at book to be BRL1.19bn ($690m) and anywhere between BRL1.135bn ($657.6m) and BRL1.25bn ($723m) using a discounted cash flow valuation. Barclays Capital notes that JBS shares now trade at 7.9x EV/Ebitda versus an 8.4x EV/2012Ebitda for Vigor based on Bradesco’s appraisal. The deal could unlock roughly BRL89m in equity, according to Barclays. The bank estimates the swap ratio could be 1:0.58 and the price for Vigor shares could range between BRL11.35 and BRL12.48 per share. The Vigor shares would be listed on Brazil’s Novo Mercado.