Brazilian meatpacking giant JBS SA is not backing down from its plan to conduct a dual listing, arguing that the proposal will be a long-term value proposition for investors.
If minority shareholders approve the proposal at the May 23 vote, JBS — the world’s largest meat processor — will proceed with listing on the New York Stock Exchange through its Netherlands-based entity, JBS NV.
The dual-class structure would involve the issuance of Class A and Class B shares. Meanwhile, Brazilian depositary receipts of the company will continue to trade on the São Paulo exchange.
According to the report, Class A shares would be traded on an exchange, while Class B shares, held only by controlling shareholders, would have ten votes for each par value share.
Concerns about shareholder rights
Institutional Shareholder Services (ISS), a prominent proxy advice company, has criticised the proposed listing structure.
ISS cautioned that the strategy could potentially restrict minority shareholders’ rights, particularly given the voting gap between the two share classes.
In one scenario, the Batista family’s J&F investment company, which presently controls JBS, might retain up to 85% of voting power while not owning a commensurate share of total equity.
However, JBS has fiercely opposed the ISS viewpoint.
In a letter to shareholders seen by Reuters, the company said that the consulting firm “fails to recognise the long-term commitment and strategic importance” of the present controlling shareholder, which JBS attributes to its climb to worldwide leadership in the food industry.
Guilherme Cavalcanti, Chief Financial Officer, addressed the concerns directly on a conference call with analysts.
He underlined the need for having a clear and experienced controlling shareholder in a complicated and dynamic business such as global meatpacking.
Market reaction and outlook
JBS shares were down almost 6% after Wednesday’s call with analysts, despite the company having logged strong results earlier this week for the first quarter.
The executive acknowledged intensifying macroeconomic headwinds and cautioned that this year could become more difficult than next.
The company noted an increasing cycle of reduced supply of US cattle and ongoing uncertainty about global tariffs, especially those relating to US meat exports to China.
However, the management reiterated its strategic focus on the long-term aspects of NYSE to provide global access to capital.
The move comes after JBS won the go-ahead from the US Securities and Exchange Commission for the plan, which would allow the firm to list shares in New York as soon as next month if the proposal is approved in a forthcoming vote.
Voting uncertainty and comparisons with rivals
If the dual listing is refused, JBS will have to re-file with the SEC, which could take another three to six months.
Goldman Sachs analysts remarked this week that the use of share classes with different voting rights is common in the business.
Tyson Foods in the United States, as well as Brazilian peers Marfrig, BRF, and Minerva, all have mechanisms in place to assure clear controlling interests.
JBS has claimed that this strategy provides stability and strategic direction, particularly given the global protein industry’s complicated supply chain and regulatory landscape.
During the analyst call, Cavalcanti also stressed that Class A shareholders will be able to change their shares to Class B, though the practical implications of such conversions are limited given the Batista family’s current concentration of voting power.
As the May 23 vote approaches, the outcome is expected to have far-reaching consequences not only for JBS’s capital strategy but also for corporate governance trends in Brazil’s top multinational corporations.
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