JBS USA has option to acquire XL Foods

by Keith Nunes
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GREELEY, COLO. – JBS USA, one of North America’s largest animal protein processors, has entered into an agreement to manage the operations of XL Foods’ Lakeside beef processing plant in Brooks, Alta. As part of the agreement, JBS USA has the option to purchase the Canadian and U.S. operations of XL Foods.

XL Foods’ agreement with JBS comes at a time when XL Foods is under pressure following the recall of beef products manufactured at the Brooks facility that may be contaminated with E. coli O157:H7. In early September, the Canadian Food Inspection Agency identified a positive E. coli O157:H7 sample of raw beef trimmings produced at the Alberta plant. The company did not initiate a recall at that time because it was determined none of the contaminated product had reached the market. By mid-September it was determined contaminated product manufactured at the facility had reached the market and was associated with illnesses in Canada and the United States.

On Sept. 27, the C.F.I.A. temporarily suspended XL Foods’ license to operate the Brooks facility. The inspection agency determined food safety controls at the facility were not adequate.

On Oct. 11 the facility resumed processing meat products under “intensified inspection and sampling activities,” according to the C.F.I.A., and no products were allowed to enter the market place.

Financial pressures from the recall led XL Foods to lay off 2,000 employees who work at the facility on Oct. 13. Eight hundred workers were called back to the plant three days later to finish processing beef carcasses for a C.F.I.A. assessment of operations at the facility. The workers then were laid off the following day.

Part of JBS’s agreement to take over the Brookside facility is the company’s option to buy XL Foods, which includes the Brookside beef packing plant; a beef packing plant in Calgary, Alta.; a feedlot in Brooks, Alta.; a beef packing plant in Omaha, Neb.; and a beef packing plant in Nampa, Idaho.

If JBS exercises its option to acquire XL Foods, it will pay $50 million in cash and $50 million in JBS S.A. shares, the Sao Paulo, Brazil, parent company of JBS USA. In addition, JBS USA said it would assume none of XL Foods' debt or liabilities.

"Today, JBS USA expands its North American operations through an agreement with Canada's XL Foods, one of Canada's largest producers of beef and related products," said Bill Rupp, president and chief operating officer of JBS USA Beef. "As the world's largest producer of animal protein, we know full well the commitment it takes to manage world-class operations that produce safe and nutritious products for consumers around the world to enjoy. We believe our experienced team will prove an invaluable asset in the management of XL Lakeside and we look forward to exploring our options to purchase XL assets in the near future."
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