(WSJ) Brazilian beef giant JBS SA is set to announce as soon as next week the acquisition of Texas-based Pilgrim's Pride Corp. for a price of roughly $2.5 billion, say people familiar with the matter. The deal would pull the second-largest chicken company in the U.S. out of bankruptcy court and shake up the global meat business.

If the JBS deal for Pilgrim's Pride advances, the new company would create a stronger rival to Tyson Foods. Above, the Brazil company called itself 'The world's largest meat producer' after it acquired Swift & Co. in 2007.

The deal was in the final stages of negotiation Wednesday and could fall apart. But if it moves ahead as expected, it would create a new US. rival to Tyson Foods Inc., the biggest U.S. meat company that produces beef, chicken and pork. Combined, Pilgrim's Pride and JBS's U.S. unit -- which includes sales at the JBS business in Australia -- would have posted about $20 billion in revenue last year. Tyson's fiscal 2008 revenue was $27 billion.

A JBS-Pilgrim deal would probably attract scrutiny from U.S. antitrust enforcers, who have said they plan to take a hard look at competition in the agriculture business. Any deal is sure to raise concerns across U.S. farm country. Some ranchers and chicken farmers are worried that greater concentration in the industry could decrease their power in the market and translate into lower prices for their animals in the long run.

JBS, while not a household name in the U.S., is one of the world's largest meat producers and for years has been on a global acquisition binge designed to make it the biggest.

Until now, JBS has largely confined itself to red meat, including pork. Its core business involves buying live animals from ranchers and feedlot operators, slaughtering them and turning them into meat products that it sells world-wide. In contrast, Pilgrim's Pride is solely in the poultry business. Last year Pilgrim's Pride and Tyson each held about 22% of the U.S. market. A Tyson spokesman declined to comment.

Last year, JBS acquired Smithfield Beef, a U.S. beef processor, from Smithfield Foods Inc. In February, JBS canceled its plans to acquire National Beef Packing Co., a Kansas City, Mo., processor, after the deal was challenged on antitrust grounds by the Justice Department and 13 states.

In 2007, the company bought Swift & Co., a U.S. meat company that traced its roots to the 19th century, for $225 million plus the assumption of $1.23 billion in debt.

Sort & Cull Comments: To the average American just trying to pay the light bill and swap the occasional clunker for cash, the names of JBS and J. Dudley Butler are equally obscure. Nothing on the foreseeable horizon is likely to change that.

Yet if the JBS purchase of Pilgrim’s Pride is truly a done deal, readers of agricultural news may be set for quite an education relative to both the Brazilian giant on steroids and the newly appointed sheriff at the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA).

This strikes me as an odd move by JBS on more than one level. Beyond odd, the proposed acquisition has a certain impulsiveness and South American swagger.

Let’s not forget that it’s been less than six months (i.e., late February) since the Justice Department took JBS to the woodshed for trying to swallow-up National Beef. Apparently, the sting of this anti-trust spanking quickly wore off.

I suppose corporate attorneys were quick to advice the head office in Brasilia that this voracious sweep through the buffet of U.S. meat production was entirely different. JBS would simply be following the sanctioned behavior of Tyson and the like. A single-minded giant maybe be a no-no, but the current American playing field clearly welcomes diversified dominance. Right?

I’m no lawyer, but such thinking and systematic contraction surely leads to a briar patch surrounded by hedgerows and covered by a thicket. JBS may first want to buy a major accounting firm in order to manage the avalanche of “billable hours” it will no doubt accrue in the months ahead.

It would be presumptive on my part to suggest that a smart and successful company like JBS has not completely anticipated the real expense of this bold salvo. Yet if the enterprise proves to be surprisingly difficult, JBS may have failed to take the full measure of the new man at GIPSA.

Besides being a trial lawyer and erstwhile cattle producer, J. Dudley Butler is a member of grassroots producer group R-CALF and a founding member of the Organization for Competitive Markets (OCM). Both groups have strongly criticized GIPSA in recent years, claiming the agency has not sufficiently protected competitive trading practices in the livestock industry. Furthermore, Butler spent some years arguing poultry arbitration cases against (guess who?) Tyson Foods.

Now Mr. Butler could look at this situation with a big yawn and reach for the rubber stamp. But my guess if that he’s more likely to twitter Christine Varney, the new and aggressive chief antitrust enforcer at the Department of Justice, strongly suggesting a second or third look.

(ES/)

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