Industry giant takes over XL Foods – JBS to run company with option to buy

By Matt McClure, Calgary Herald October 18, 2012

CALGARY — An embattled Alberta meat packer will soon be managed and possibly bought by the world’s largest animal protein processor.

Effective immediately, XL Foods Inc. has reached a deal with Brazilian-controlled JBS to operate its feedlots and processing plants, including the 4,000 head-a-day facility in Brooks that was shuttered recently by federal food inspectors due to an E. coli scare.

“We know full well the commitment it takes to manage world-class operations that produce safe and nutritious products,” Bill Rupp, president of JBS’s U.S. division, said in a news release.

“We believe our experienced team will provide an invaluable asset in the management of XL Lakeside and we look forward to to exploring our options to purchase XL assets in the near future.”

Under the deal, JBS has the exclusive option to buy the Lakeside plant, feedlot and farming operations in Brooks, plus packing facilities in Calgary, Omaha, Nebraska and Nampa, Idaho, for $100 million. Half the payment would be in cash and half in JBS shares.

“Under no scenario will JBS assume any of XL Foods’ debt or liabilities,” the company release said.

Federal Agriculture Minister Gerry Ritz said in an e-mailed statement that the move wouldn’t affect the timetable or requirements for reopening the plant.

“While this is a private business decision, Canadian consumers can be assured the Canadian Food Inspection Agency will enforce the same rigorous food safety standards at the Lakeside facility regardless of the management,” Ritz said.

Officials with Nilsson Bros Inc., XL’s parent company, could not be reached immediately for comment, but a company insider said the firm had been hit hard by the recent closure of its Brooks plant and the country’s largest ever beef recall.

With sales of more than $30 billion a year, JBS S.A. became the world’s largest company in the beef sector with its 2007 acquisition of the U.S.-based Swift and Company.

South of the border, the firm operates eight cattle processing plants, one processed meat facility, a tannery and a dozen feedlots.

Workers at the Brooks plant were laid off again Wednesday as federal food inspectors analyzed test results from the processing of 5,000 carcasses to ensure contaminated product isn’t being produced.

CFIA said an assessment of those results — a necessary step before XL Foods Inc. can resume normal operations — won’t be completed until early next week.

About 800 of the facility’s 2,200 workers were recalled earlier this week to complete the deboning and cutting of carcasses that were left at the plant when it was shuttered Sept. 27 by CFIA officials.

Doug O’Halloran, president of the United Food and Commercial Workers local that represents most plant employees, said JBS’s arrival on the scene was a positive development.

“I’m not normally in favour of foreign control and ownership, but the Nilsson brothers were in over their heads,” O’Halloran said.

“They can go back to running their ranches now and leave the operation of this plant to someone who knows what they’re doing.”

While the union boss estimates the company has paid out $3 million in wages to workers during the shutdown, he is worried that if the current layoff drags on, some employees will leave for jobs elsewhere.

“Our big concern is that when it does reopen that there are enough inspectors with greater authority to stop or slow the line if they spot a problem,” O’Halloran said.

“The front-line people with CFIA need to have ability to exercise their judgment and err on the side of caution even if it means lost production.”

Brooks Mayor Martin Shields hopes the plant reopens quickly to ensure as many temporary workers as possible stay in the city.

“One unknown to us at this point is the sense of what is the transition time,” he said. “Hopefully through our social agencies, through our food bank, we can keep things stable and get as many people back to work.”

About one in six people in the southeastern Alberta city work at the meat packing plant.

Cathy Housdorff, press secretary for provincial agriculture minister Verlyn Olson, said it’s a nothing but good news for Alberta farmers.

Housdorff said Olson was on the phone with many of the affected parties Wednesday night, trying to find out more about JBS.

“We don’t know much about them at this point, so that’s one of the reasons he would like to have a conversation with them,” she said.

David Chalak, board chairman with the Alberta Livestock and Meat Agency, said the JBS deal was a positive development.

“JBS has a great reputation and certainly have a very strong and significant experience in the processing industry, and their involvement will be seen on the whole as a positive,” he said.

“It certainly alleviates some of the uncertainties around how this plant will move forward if and when it was recertified.”

In Ottawa, the New Democrats said they would introduce a motion Thursday calling for the resignation of Agriculture Minister Gerry Ritz. They will also seek the reversal of cuts to CFIA’s budget and request the federal auditor general to investigate.

“Self-regulation doesn’t work,” NDP agriculture critic Malcolm Allen said in a news release.

“It’s that simple and we’ve seen its results.”

Public health officials have said 15 people in four provinces have now become ill from a strain of E. coli linked to product from the plant.

CFIA suspended the plant’s operating licence after repeated shipments of tainted meat were intercepted in early September at the U.S border and at a facility in Calgary.

An investigation found shortcomings in the Brooks facility that included a clogged carcass washer and insufficient analysis of test results to ensure contaminated lots were being diverted.

CFIA officials said in a release that they continue to maintain strict oversight of meat products from the plant being shipped for rendering, a high temperature disposal method.

“No products from this facility will enter the marketplace until the CFIA is fully confident that the plant’s food safety controls are working effectively,” the release said.

The agency did not immediately respond to questions about whether the company will be allowed to ship meat or beef trim currently in the plant to restaurants or retailers if it again tests negative for E. coli.

The discovery of tainted beef from the Brooks plant has resulted in the largest beef recall in Canadian history.

CFIA extended the recall of XL Foods products again late Tuesday to include additional brands sold under different product names in British Columbia and Alberta.

With files from Bryce Forbes, Calgary Herald.

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