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JBS' dual listing proposal aims to help close valuation

gap with

peers

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SEC has not approved company's primary NYSE listing

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Even if listing approved, BNDES will not be forced to

immediately sell shares, sources say

By Luciana Magalhaes and Ana Mano

SAO PAULO, March 19 (Reuters) - Brazilian meat processor

JBS' decision to pursue a U.S. listing has shone a

spotlight on its No. 2 shareholder, National Development Bank's

(BNDES) investment arm, and whether the company's move clashed

with the bank's core mission of fostering Brazilian corporate

development.

JBS, the world's biggest meatpacker, moved closer this week

to a dual listing that has been in the works for years, sending

its shares soaring 18% on Tuesday. The dual listing would

provide access to more investors and possibly aid JBS in raising

its valuation closer to peers.

Shares were up slightly on Wednesday.

Helping the process forward, the development bank's

investment arm, BNDESPar, said it would abstain from voting at a

future shareholders meeting on the proposal to list JBS shares

on the New York Stock Exchange through a Dutch subsidiary.

Prior to Monday's announcement, market speculation had

centered on whether BNDESPar would endorse JBS' global listing

strategy, given the development bank's mandate to prioritize

Brazilian economic interests.

BNDESPar has been a key JBS stakeholder since 2007, when it

helped bankroll a buying spree that saw it acquire U.S. brands

such as Swift and chicken processor Pilgrim's Pride,

investments touted as part of a strategy of creating "national

champions."

While one analyst said BNDESPar's abstention hinted at

opposition to the listing, a source familiar with negotiations

told Reuters the bank's lawyers worked to craft a deal with

controlling shareholder J&F Investimentos that would allow it to

stay a major shareholder.

The transaction was designed to avoid BNDESPar having to

immediately sell its shares on the market, said the source,

noting that the bank will analyze opportunities to sell or buy

JBS shares.

Monday's abstention decision by BNDESPar, which owns 20.8%

of the shares, effectively punted the decision on approving the

dual listing to minority investors. Separately, the BNDES said

that J&F, a holding company run by JBS' founding Batista family,

which owns 48.3% of the shares, committed to doing the same.

"(The) official JBS statement seems to show that the BNDES

was opposed to the dual listing and that the agreement was drawn

up in such a way as to expunge the opposing vote that would most

likely be cast at the meeting," said Igor Guedes, an analyst

with Genial Investimentos, referring to a regulatory filing from

JBS communicating the BNDESPar's decision to abstain from

voting.

JBS and BNDESPar declined to comment.

SEC APPROVAL

JBS' U.S. listing proposal remains contingent on approval

from the Securities and Exchange Commission, with no definitive

timeline established for regulatory clearance.

Though the SEC has refrained from public comment on the

matter, a source with knowledge of the commission's internal

deliberations indicated that regulators view JBS' proposed dual

listing structure as viable.

Guedes noted that SEC concerns regarding ownership

concentration may also have influenced the agreement between J&F

and BNDESPar. The arrangement could signal that the bank would

be willing to reduce its position if needed for the listing to

be approved, he said.

Leonardo Alencar, an analyst with XP Investimentos,

challenged the view that the potential sale of a BNDESPar stake

could help the SEC approve the dual listing.

He noted also that the agreement between the two biggest

shareholders could prompt other minority shareholders to demand

protections similar to those secured by BNDESPar, which was

guaranteed compensation of up to 500 million reais ($88.14

million) if JBS shares fail to rise to a certain level following

the planned listing. That level has not been made public.

The company's plan has attracted opposition from lawmakers

in the U.S. and UK, as well as environmental groups who sent

letters to the SEC expressing concerns about the listing based

on the company's environmental impact and corruption allegations

involving members of the founding family.

($1 = 5.6729 reais)