Shares of Brazil's JBS, the world's biggest beef exporter, soared on Tuesday, adding nearly $3 billion to its market value after management announced it would take its international businesses public in a U.S. initial public offering.
The plan, announced late on Monday, to spin off JBS's international businesses and its Brazilian poultry unit Seara under Holland-based JBS Foods International B.V. is part of a much simpler, revised corporate reorganization plan intended to reduce company financing costs.
The new reorganization comes less than two months after Brazil's BNDES development bank, which holds nearly 20 percent of JBS, surprised investors by vetoing an earlier restructuring proposal.
Under the earlier plan, management would have put the Brazilian company under control of offshore headquarters in Ireland and forced JBS SA investors to swap their shares for either Brazilian depository receipts or shares in JBS Foods International.
The structure of the current plan, which leaves JBS SA in Brazil as the overriding corporate structure to oversee its beef business, does not fall under the veto power of the BNDES, the company's No. 2 shareholder.
"We have been looking for a structure that best represents our global presence," Chief Executive Wesley Batista told investors on a call early Tuesday.
The BNDES said in October when it opposed the original reorganization that it was not in shareholders' interest.
Batista said the bank viewed the company's new plan positively, though the structure of the current reorganization does not give the BNDES veto power based on its shareholder agreement, which expires in 2019.
Shares of JBS SA were up nearly 17 percent on Tuesday, marking the biggest daily gain since May 12. Shares remain down 52 percent from just over a year ago, however.
Batista told investors on Tuesday's call that the company plans to hold an IPO in the first half of 2017, which would expand market capitalization by far less than the 10 percent that it is allowed without BNDES approval. The company said its market cap currently is roughly 55 billion reais.
Analysts at major investment banks view the new plan as less controversial politically because it leaves the headquarters of one of Brazil's flagship companies based in national territory. Yet it still offers real cost savings for the company that currently generates the bulk of its revenue from sales originating in the United States, Europe and Australia.
Born from the cattle ranges of Brazil's center-west savanna more than two decades ago, JBS SA will hold all of the class B shares of JBS Foods International, while the spin-off's class A shares will be offered in the eventual IPO.
Batista added that all outstanding bonds of the company would be transferred to the new U.S.-listed unit to rebalance company debt.
Leverage for JBS Foods International is expected to surge initially but then converge toward 3 times earnings before interest, taxes, depreciation and amortization by the end of 2017, he said.
"All revenue from the IPO will be used to pay down debt," Batista said, adding that bondholders are expected to accept the reallocation of debt to the U.S.-listed spin-off.