Relevant Fact – Swift & Co. Closing


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Relevant Fact – Swift & Co. Closing

  1. 1. Agenda Página Conclusion of Swift’s Acquisition Process July 12, 2007
  2. 2. Disclaimer The forward-looking statements presented herein are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management, and on information currently available to us. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Our future operating results, financial condition, strategies, market share and values may differ materially from those expressed in or suggested by these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. Forward-looking statements also include information concerning our possible or assumed future operating results, as well as statements preceded by, followed by, or including the words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions 1
  3. 3. Agenda 1 Message from the Board of Directors 2 Swift Acquisition Process Concluded! 3 Acquisition Process Timeline 4 Final Acquisition Structure 5 JBS + Swift (Pro-forma) 6 Recovery of Swift’s Results 7 Actions of Turnaround Process 8 Turnaround in Numbers 9 Final Considerations 2
  4. 4. Message from the Board of Directors It is with great satisfaction that the management of JBS announces the conclusion of the Swift acquisition through the cash payment of US$1,458,872,836.55, five days in advance of the original schedule. The acquisition was concluded with absolute success and resulted in the creation of the world’s largest beef company with a significant share in the pork industry. The capital structure used resulted in a company with a reduced debt level and with one of the lowest financial leverages in the sector, while it also generated a reduction in financial expenses. All measures were taken with the objective of creating value to all of the company’s shareholders, creditors, employees and partners of JBS. The acquisition reaffirms JBS’ commitment to its growth objectives and its capabilities in achieving them! 3
  5. 5. Swift Acquisition Process Concluded! + The world’s largest beef company is born, with a slaughtering capacity of 47.1 thousand heads per day; The world’s largest beef exporter; And the largest Brazilian multinational company in the food sector; With production and distribution capacity in the world’s 4 main beef producing countries; Acessing 100% of the world’s beef consuming markets; Consolidating brands, plants and expertise; And with a diversification platform in pork – 3rd largest in the US. 4
  6. 6. Acquisition Process Timeline 05/29/07 Celebration of the Agreement and Plan of Merger 06/01/07 Board of Directors Meeting – Approval of the acquisition by JBS 06/08/07 Board of Directors Meeting – Approval of capital increase of JBS and launching of consent solicitation process. 06/11/07 Comencement of Consent Solicitation process – Swift as unrestricted subsidiary. 06/13/07 Call notice for Extraordinary Shareholders Meeting 06/27/07 Board of Directors Meeting – Capital increase of 227.4 million shares totaling US$950 million 06/27/07 Relevant Fact – BNDESPAR approves subscription of up to US$750 million in the capital increase of JBS 06/29/07 Extraordinary Shareholders Meeting – Approval of the Swift acquisition and of the proposed capital increase 07/10/07 Suspension of the bond issues and revolving facility by Swift 07/11/07 Conclusion, 5 days in advance, of the Swift acquisition process with the payment of US$1.459 million 5
  7. 7. Final Acquisition Structure Final Structure 1,2,3 Acquisition of Swift by JBS Final Structure 1,2,3 Acquisition of Swift by JBS Capital increase by JBS of US$950 BNDESPAR Market J&F million; Up to US$750 MM US$ ? MM Up to US$200 MM Proceeds raised with financial US$950 MM institutions in the amount of US$750 million (additional proceeds raised for working capital purposes); Payment of equity to HM Capital in the 100% US$950 MM amount of US$225 million and of debt in the amount US$1.234 million, US$750 US$225 New Debt MM NewCo MM HM Capital totaling the acquisition amount of US$1.459 million3; 100% US$1.234 MM4 Debt reduction, positioning Swift as a company with one of the best financial Payment of Old Debt conditions of the sector in the USA; Reduction in annual financial expenses Cash Balance of US$240 MM5 of approximately US$86 million due to a reduced debt level and new debt issued at lower rates; 1. Simplified chart of the transaction structure for illustrative purposes only 2. Simplification for subordination structure composed by 3 holdings 3. Does not include fees, tender offer and other transaction costs 4. Updated closing debt added of accumulated interest and tender offer expenses 5. Estimated cash balance to be partially used for the payment of fees, tender offer expenses. The remainder will be 6 used for working capital.
  8. 8. JBS + Swift (Pro-forma) COMBINED PRO-FORMA Slaughtering capacity¹ 24,100 heads/day 23,000 heads/day 47,100 heads/day (Global ranking) (# 3) (# 4) (# 1) Heads Slaughtered 3,4 MM 6,2 MM 9,6 MM 2006¹ Plants 28 12 40 Net Revenue US$ 2,0 bln2 US$ 9,5 bln3 US$ 11,5 bln Net Debt US$ 0,7 bln4 US$ 0,5 bln5 US$ 1,2 bln Net Debt/EBITDA 2,5x 5,2x 3,1x Net Debt/Adjusted 2,5x 3,2x6 2,7x EBITDA Notes 1. Considering beef only 2. JBS 2006 net revenue converted into US$ at FX rate of R$2.1771 3. Swift net revenues for LTM ended February 2007 (unaudited preliminary data – 8-K Form) 4. JBS net debt as per financial statements of 03/31/2007 converted in US$ at FX rate of R$2.0504 5. Swift Net Debt after closing considering all raised proceeds and transaction payments 7 6. Calculation considers adjusted EBITDA excluding non-recurrent expenses of US$53 million (US$53 MM ICE and US$9.4 MM in other costs)
  9. 9. Net Revenue and EBITDA Recovery at Swift Net Revenue (US$ million) Net Revenue (US$ million) Considerations FY2007 Considerations FY2007 Net revenue recovery during fiscal year 9.436 9.669 9.350 9.520 2007 due mainly to price increases in the 8.782 8.196 8.072 US beef division and to price and volume increases in the US pork division and Australia beef division; EBITDA recovery in the fiscal 2007 to an EBITDA margin of 1.0%, from 0.1% in 2006; FY01 FY02 FY03 FY04 FY05 FY06 FY07* During fiscal year 2007, the company lost employees at its US plants expenses due EBITDA (US$ million) and EBITDA margin EBITDA (US$ million) and EBITDA margin to an immigration inspection process (ICE – Immigration and Customs Enforcement), Margin (%) 3,0% resulting in: A temporary reduction in production 2,2% 2,3% and, consequently, in sales; 1,8% 238,6 220,1 1,7% 181,7 Non-recurrent expenses in the 161,2 163,0 1,0% amount of US$53 million. If this expense was not considered, EBITDA 0,1% 96,3 would amount to US$158.6 million, 5,7 representing an EBITDA margin of FY01 FY02 FY03 FY04 FY05 FY06 FY07* 1.6% Source: Swift & Co Note: Unaudited pro-forma data related to the years of 2001, 2002 and There are no other issues related to this 2003 from predecessor ConAgra Swift’s fiscal year ends in May event and all employees have been 8 * Preliminary unaudited data (8-K Form) replaced
  10. 10. Actions of Turnaround Process Management changes in key positions at Swift in the USA and Australia and simplification of the organizational structure with the elimination of duplicate positions; Separation of the operational management of the beef and pork divisions in the USA; Reduction in annual financial expenses due to a reduced debt level and new debt issued at lower rates; Beginning of a second shift in the Greeley plant; Better use of the installed capacity at existing plants; Estimated transportation cost reduction by increasing occupation rate from 92% to 99%; Optimization of the price to quality ratio; Estimated improvement in the rear de-boning process by 0.8%; 9
  11. 11. Actions of Turnaround Process Estimated improvement in the forequarter de-boning process by 1.2%; Estimated improvement in the ribs de-boning process by 0.7%; Estimated improvement in the yield of the leather by 1.5%; Estimated improvement in the yield of the pork intestines (US$1.0 per head); Estimated fixed cost reductions at the plants of US$2.90 per head; Estimated variable cost reductions of US$2.10 per head; Estimated reductions in expenses related to insurance, consulting fees and IT; Optimization of the sales teams; Remuneration driven by results. 10
  12. 12. Turnaround in Numbers Turnaround Financial Impacts - (US$ M M ) Preliminary Estimates Increase in Revenues Implmentation of second shift in Greeley 800,0 Optimization of installed capacity in the Grand Island, Dumas and Hyron plants 300,0 Potential Increase in Revenues 1.100,0 Cost Reductions Sales, General and Administrative (SG&A) Consulting 5,0 Reduction of Organizational Structure 4,0 Insurance 8,0 Information Technology (TI) 8,0 Sub-total 25,0 Variable Costs (Packaging, Supllies, Electricity, Gas) 11,6 Fixed Costs in Plants 16,0 Logistics Optimization 17,5 Improvements in Carcass Yield Rear De-boning 18,4 Forequarter De-boning 23,5 Ribs De-boning 4,5 Leather 37,8 Pork Intestines 11,5 Sub-total 95,7 Potential Operational Gains Identified thus Far 165,7 11
  13. 13. Final Considerations Conclusion of the acquisition by JBS using the best capital structure, resulting in savings of approximately US$86 million in interest expenses; Relevant support by BNDESPAR in the company’s expansion and internationalization process; Considerable debt reduction at Swift, making it a company with one of the best financial conditions of the sector in the USA; Swift is already showing improvements in its operational results (FY07 x FY06); Turnaround process has already began, with a large portion of the actions to be implemented quickly and to generate results in the short to medium term; The management team that will guarantee the success of the turnaround process is already defined; The conclusion of the Swift acquisition does not represent the end of JBS’ growth process, but one more stage in the company’s leadership expansion and consolidation in the world beef industry; Once again JBS’ management reaffirms its excellent track record in acquisitions 12
  14. 14. Questions & Answers 13