In a Friday filing with the U.S. Securities and Exchange Commission, JBS Foods International requested a withdrawal of the IPO. While neither company gave a new timetable for the IPO, JBS said in a statement to Reuters that a U.S. listing of JBS Foods “is the best way possible to maximize shareholder value.”

Parent JBS and the processed food subsidiary first announced plans for a U.S. offering on Dec. 5. Sao Paulo-based JBS, the world’s No. 1 meatpacker, reaffirmed plans to list the subsidiary in August, saying a transaction could take place by the end of next year.

The proposal for the JBS Foods International IPO was first put to test in March, after a scandal over an alleged bribery of health officials triggered bans on Brazilian meat exports. Two months later, two members of the family that controls JBS agreed to a plea bargain deal in Brazil relating to a corruption probe.

A collapse of the plan is a setback for Brazil’s billionaire Batista family, which owns 42 per cent of JBS and saw the IPO as a way to improve JBS’s global standing. The transaction was seen as a way to help decouple JBS’s businesses from Brazil — where reputational issues have impaired share performance in recent months.

Reuters reported in March and in May, shortly after the food safety and corruption scandals, respectively, that JBS would press ahead with the US$1 billion IPO plan despite dwindling investor confidence.

Common shares fell 0.6 per cent to 8.60 reais (C$3.39) on Monday. The stock is down 25 per cent so far this year.

Brothers Wesley and Joesley Batista were arrested last month in connection with insider trading and other offenses related to their plea deal. Wesley, the elder of them and also JBS’s former chief executive, quit as a result.

Both brothers will face trial for carrying out stock and foreign exchange transactions based on knowledge of their plea deal, a federal court confirmed on Monday. Both have been charged last week on the same case.

Both Batistas worked personally on the refinancing of 21 billion reais (C$8.3 billion) in short-term debt of JBS and spearheaded the sale of several assets, including the company’s cattle feedlot at Brooks, Alta.

Among the international operations that would have been included in the JBS IPO is one of Canada’s biggest beef packing plants, also at Brooks, with capacity to process up to 4,200 head of cattle per day.

— Reporting for Reuters by Guillermo Parra-Bernal and Jake Spring.

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In remarks to Reuters, BNDES president Paulo Rabello de Castro condemned a decision made “in the dead of night” over the weekend to put JBS founder Jose Batista Sobrinho in charge after his sons were arrested for alleged insider trading.

“I see deviousness in what was done,” Rabello said. “A meeting of that magnitude cannot be called at the last minute.”

The weekend decision to install Batista Sobrinho, 84, as the company’s new CEO, further raised tensions between BNDES and JBS, which became the world’s No. 2 food processor in less than a decade largely thanks to fresh capital from the development bank. The bank is also the company’s second-largest shareholder.

Rabello also said the Batista family, which owns a 42 per cent stake in JBS, lacks the sensibility needed for corporate governance, and called on markets watchdog CVM to investigate the “surprise” weekend meeting.

BNDES owns 21 per cent of JBS and has led a push by minority shareholders to remove the Batistas from management since Wesley and Joesley Batista, formerly chief executive and chairman, respectively, testified in a plea deal to bribing hundreds of lawmakers.

The rift between the bank and the Batistas has widened as the plea deal ensnared Brazilian President Michel Temer in a corruption scandal. Rabello was appointed to run BNDES shortly after the plea deal — igniting concerns of a potential vendetta.

A person with knowledge of the Batistas’ thinking told Reuters on Monday that they want to keep a family member in command because commercial lenders asked that as a prerequisite to refinance almost 21 billion reais (C$8.2 billion) worth of loans maturing within the next 12 months.

Still, representatives from three of the five banks that signed the July 25 accord denied having demanded that. One of them, speaking on condition of anonymity, had expected Wesley Batista to stay for a short period to help finalize a series of asset sales pegged to the refinancing.

Reuters reported on July 13 that state-controlled Caixa Economica Federal SA and Banco do Brasil SA, as well as private-sector peers Banco Santander Brasil SA, Banco Bradesco SA and Itau Unibanco Holding SA were participating in the refinancing plan.

“We didn’t ask that — in fact, we all expected a smooth management transition,” said one of the banks’ representatives.

Itau, Banco do Brasil and Bradesco declined to comment. Santander Brasil and Caixa Econômica did not have an immediate comment.

‘Unanimous decision’

JBS said in a statement that the Saturday meeting was called on Thursday and attended by all board members, adding that the vote was unanimous. Rabello said he was unaware of the board meeting and criticized a representative for BNDES’s investment arm BNDES Participacoes for taking part.

BNDESPar, as the investment arm is commonly known, has no plans to sell any of its JBS stake due to the rift, Rabello said.

Shares of JBS closed four per cent down at 8.50 reais on Monday, as traders worried that a battle between its two biggest shareholders may distract management from efforts to sell assets, protect margins and reduce debt.

Monday’s decline was the steepest since Sept. 5, increasing the stock’s rout this year to 25 percent.

Batista Sobrinho is retaking the reins of his family’s global meat empire as his sons have become increasingly entangled in the graft investigation.

Joesley Batista surrendered to police after recordings suggested he tried to take advantage of prosecutors and conceal details during negotiations that led to the May plea deal. He and his brother also have been accused of dumping JBS shares ahead of that plea bargain.

The elder Batista will be closely advised at JBS by top executives including chief operating officer Gilberto Tomazoni; Andre Nogueira, who heads the JBS USA unit; and Wesley Batista Jr., the 25-year-old son of Wesley Sr., who has served as head of JBS USA’s beef division.

Batista Sobrinho late Monday announced the appointment of Tomazoni to a newly created position, global chief operating officer, and of Wesley Batista Jr. as president of JBS operations in South America. Nogueira will continue as president of JBS USA.

Wesley Batista Jr. was also elected as a statutory director at the JBS board meeting on Saturday, the company said.

— Reporting for Reuters by Rodrigo Viga Gaier and Guillermo Parra-Bernal; additional reporting by Tatiana Bautzer in Sao Paulo. Includes files from AGCanada.com Network staff.

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Wesley Batista, who has been at the helm of JBS since 2011, was detained under an arrest warrant against him and his younger brother Joesley for suspected insider trading. The billionaires, both in their mid-40s, control 42 per cent of JBS.

Their lawyer, Pierpaolo Bottini, called the allegations and the arrest “unjust, absurd and regrettable.” If convicted, the Batistas may be the first people in Brazil jailed for insider trading.

JBS shares rose 1.7 per cent, reversing early losses, on optimism that Wesley Batista’s arrest will accelerate a search by the company to replace him as CEO. The accusations could hurt a plea deal that both brothers signed in May in relation to a three-year graft probe that has shocked Brazil’s political and business establishment.

The insider trading case involving JBS follows probes by markets watchdog CVM on trades that took place before the plea deal was leaked to the press on May 17. The impact from the leak, which ensnared senior politicians, led to Brazil’s worst financial market selloff in at least a decade.

According to police investigators, the Batistas were aware of the market impact that their plea deal would have on JBS shares and the currency. Police said the brothers created a strategy to protect their JBS holding and help the company amass large foreign-currency positions ahead of the leak.

On May 18, the stock shed 9.7 per cent, while the Brazilian real tumbled 8.2 per cent — its biggest daily decline since January 1999.

“A day ahead of the leaks, JBS rose to the No. 2 spot in currency purchases, an unheard of fact,” police investigator Rodrigo de Campos Costa said in a news conference.

BNDES calls for new CEO

The detention of Wesley Batista comes as his plea deal with prosecutors is unraveling due to alleged omissions in the brothers’ testimony. Some minority shareholders were already seeking to remove him.

“It is not every day that a CEO getting arrested for insider trading can be viewed as a credit positive, but we see the latest events as weakening Batista’s push to remain as CEO,” analysts at CreditSights Inc. wrote in a note to clients.

The yield on the company’s 7.75 per cent bond due in October 2020 rose about 0.17 percentage points to 7.966 per cent on Wednesday.

Joesley Batista has been under arrest since Sunday after recordings suggested he tried to take advantage of prosecutors and conceal details during negotiations that led to the plea deal. He has denied any wrongdoing.

In their testimony, the brothers accused President Michel Temer of working to obstruct a corruption probe, which the latter has repeatedly denied. The family’s investment holding company, J+F Investimentos SA, paid a record leniency fine of 10.3 billion reais (C$4.01 billion) related to the scandal.

Since the plea bargain deal was signed on May 31, Temer and the Batistas have traded barbs — taking their rift to corporate boardrooms. State development bank BNDES, whose investment arm owns 21 per cent of JBS, is leading the group of JBS investors seeking to oust the Batistas from the company’s management and board.

In a statement, BNDES said the company should pick a new CEO in the next shareholders meeting.

Bottini, the Batistas’ lawyer, earlier in the day, said: “The Brazilian state is using all means to promote revenge against those who co-operated with justice.”

The police said two detention orders were also issued against executives at the Batista family-owned FB Participacoes SA and JBS, without elaborating.

The scheme helped “manipulate markets in a way that all shareholders incurred some of the losses that FB Participacoes would have otherwise had to absorb alone,” a police statement said.

— Reporting for Reuters by Guillermo Parra-Bernal and Gabriela Mello; additional reporting by Pedro Fonseca in Rio de Janeiro and Tatiana Bautzer in Sao Paulo.

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A person with direct knowledge of Mubadala’s strategy told Reuters that, despite a report by Brazilian business magazine Exame earlier in the day, there was no interest or intention at this point to bid for JBS.

The source asked not to be identified in order to speak freely about the matter.

A spokesman for Mubadala declined to comment. Exame, which did not say how it obtained the information, said companies including U.S. food producer Cargill might be interested in acquiring certain JBS assets, such as Pilgrim’s Pride.

Exame did not name the potential partners that it said Mubadala had sounded out for a JBS bid. The magazine report came a month after members of the billionaire Batista family, who control about 42 per cent of JBS, signed a plea deal in a corruption probe in their native Brazil.

Shares of JBS erased gains after the source denied the Exame report, falling 1.9 per cent to 6.63 reais (C$2.69) at 1:55 p.m. local time. They had risen as much as 5.9 per cent earlier.

The Batista family’s investment holding company J+F Investimentos SA, Sao Paulo-based JBS and Cargill did not have an immediate comment.

Last month, the Batistas agreed to pay a record-setting fine of 10.3 billion reais (C$4.2 billion) related to corruption and bribery allegations. Shares of JBS have shed 29 per cent since May 16, when brothers Joesley and Wesley Batista admitted in separate plea deals to bribing over 1,800 politicians.

Part of the testimonies in the plea deal implicated President Michel Temer, who Joesley Batista accused of working to obstruct a major corruption probe. Temer denies the accusations.

State loans helped fuel growth at J+F over the past decade, enabling it to keep control of JBS while expanding into fashion, dairy production, pulp processing and banking. JBS grew from a mid-sized slaughterhouse in Brazil’s Midwest into one of the world’s top-three food processing companies in over a decade through acquisitions backed in part by government funds.

— Reporting for Reuters by Stanley Carvalho in Abu Dhabi and Guillermo Parra-Bernal in Sao Paulo. Additional reporting for Reuters by Bruno Federowski and Tatiana Bautzer in Sao Paulo.

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In a Wednesday securities filing, Sao Paulo-based JBS said that BNDES Participacoes SA, the investment arm of Brazil’s state development bank BNDES, opposed the plan, which included separating the company’s global operations and moving them to Ireland.

BNDES did not explain why it challenged the reorganization plan, JBS CEO Wesley Batista told analysts on a call from Colorado. A BNDES representative said the state agency will comment later Wednesday.

“The bank thought it was not the best road ahead for the company,” said Batista, adding that the current shareholder agreement with BNDES would end in 2019, which would then free it to reorganize operations.

Shares of the world’s No. 1 meatpacker plunged nearly 18 per cent on Wednesday, the most in eight years, signalling frustration with the end of a plan aimed at accelerating JBS’s growth, reducing fundraising costs, optimizing taxes and attracting a wider base of investors.

“This is a major negative surprise. The listing process had already been moving since May and a veto from this shareholder was totally unexpected,” said Pedro Leduc, an analyst with JPMorgan Securities. BNDESPar holds 20 per cent of JBS, making it the company’s No. 2 shareholder, after the Batista family’s 45 per cent stake.

Batista said there were alternatives to the reorganization but did not elaborate, except to say that listing North American assets on the New York Stock Exchange was one possibility. The region is the biggest source of revenue for JBS globally.

Among JBS USA’s businesses are one of the biggest beef packing plants in Canada — the former XL Lakeside plant at Brooks, Alta., with capacity to process about 4,000 head of cattle per day — and a cattle feeding operation nearby.

Under terms of the plan proposed in May, the JBS Foods International unit was to be listed in New York. Investors saw the move as the best way for JBS to become the first Brazilian multinational with a clear division of local and global assets.

The billionaire Batista brothers Wesley and Joesley, who are JBS’s CEO and chairman, respectively, expected the reorganization to be ready by November.

Change of command

The company’s shares fell as much as 17.6 per cent to 9.72 reais in Sao Paulo, their biggest drop since Oct. 15, 2008, cutting into their gains this year. Since the reorganization was announced, JBS had risen 43 per cent.

The reorganization was devised before a new Brazilian government swapped the senior management of BNDES. President Michel Temer tapped economist Maria Silvia Bastos to run BNDES and BNDESPar, replacing Luciano Coutinho, who was for years seen as a supporter of the Batistas’ push to internationalize JBS.

The idea of splitting Brazil-based and global assets gained traction because most of JBS’s revenues now come from overseas units, especially from North America. According to people with knowledge of the situation, executives had told investors in several road shows promoting the reorganization that BNDESPar was on board with the plan.

Abandoning the reorganization plan comes at a time when JBS has fallen under increased scrutiny from prosecutors and government auditors for allegedly providing Brazil’s former ruling Workers Party with illegal donations in the 2014 presidential campaign. JBS denied making any undeclared donations to the party or ruling coalition allies.

— Reporting for Reuters by Reese Ewing and Guillermo Parra-Bernal; additional reporting for Reuters by Tatiana Bautzer in Sao Paulo.

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Terms of the deal, which involves the sale of certain assets to U.S.-based Mosaic Co., are unlikely to change significantly, one of the sources said on Wednesday, requesting anonymity to speak freely about the issue.

BNDES pushed back the vote on the fertilizer deal at a Vale board meeting last Thursday, the first person familiar with the situation said. O Globo columnist Lauro Jardim, without saying how the newspaper obtained the information, reported that day that BNDES had delayed the voting on the transaction to Oct. 20.

One of the people said Mosaic could pay about $3.6 billion for some of Vale’s fertilizer assets (all figures US$). The sale of other unspecified operations within Vale’s fertilizer unit is being negotiated with Norway’s Yara International, the first person said, without elaborating.

Both Vale and BNDES, which are based in Rio de Janeiro, declined to comment, as did Mosaic. Yara said it did not comment on market speculation.

Vale, the world’s largest iron ore producer, is disposing of assets to help meet a $10 billion debt-reduction target by next year. The strategy was devised by CEO Murilo Ferreira to help insulate the mining company against declining iron ore and nickel prices, after losing a record $12.1 billion last year.

Reuters first reported on June 17 that Mosaic was eyeing Vale’s fertilizer assets.

The transaction underscores how Brazil, the world’s fifth-largest fertilizer consumer, remains a key growth spot for fertilizer and phosphate producers. Vale estimates that demand for the products in Latin America’s largest economy is expected to grow twice as fast as global demand over the next decade.

Vale has fertilizer assets in Brazil, Peru, Argentina and Mozambique. In Canada, the company has completed a feasibility study for a potash solution mine project at Kronau, Sask., southeast of Regina, and is now reviewing the study results.

Mosaic bought distribution assets from Archer Daniels Midland in Brazil and Paraguay last year.

— Reporting for Reuters by Tatiana Bautzer and Guillermo Parra-Bernal. Additional reporting for Reuters by Rod Nickel in Winnipeg.

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The deal, which is expected to close in the second half of this year, paves the way for PotashCorp to become Heringer’s principal potash supplier over time, the Canadian company said in a statement. The transaction is subject to regulatory approval in Brazil.

Under terms of the agreement, PotashCorp will acquire the stake from Heringer’s controlling shareholders Dalton Dias Heringer, Dalton Carlos Heringer and Juliana Heringer Rezende, a source with knowledge of the deal said. As part of the deal, the Heringers signed a shareholder agreement granting PotashCorp minority rights, the source added.

PotashCorp paid about 31.15 reais (C$13.58) per share for the stake, almost nine times Heringer’s closing price of 3.51 reais on Friday, according to the source. Shares of Heringer posted their biggest intraday surge in more than six years on Monday, surging almost 17 per cent to 4.10 reais.

Heringer, one of the largest fertilizer companies in Brazil, delivered five million tonnes of fertilizers, including about one million tonnes of potash in 2013, with net revenue of about $3.1 billion. Last year, the Heringers sold a 10 per cent stake to Morocco’s OCP SA for about $69 million.

The Heringer investment provides PotashCorp “with an important stake in a leading Brazilian fertilizer distribution company,” PotashCorp CEO Jochen Tilk said in the statement.

— Reporting for Reuters by Guillermo Parra-Bernal and Ashutosh Pandey.

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The acquisition is a victory for Brazilian-Lebanese financier Joseph Safra and orange juice baron Jose Luis Cutrale, who joined forces to add Chiquita to their tropical fruit business. Both tycoons fought for almost three months to win control of Chiquita, which rebuffed their three previous takeover attempts and sought to merge with rival Fyffes Plc .

Under terms of the accord disclosed in a statement earlier in the day, Charlotte, N.C.-based Chiquita will become a wholly owned unit of Cutrale-Safra and remain incorporated in New Jersey once the deal is finalized. Chiquita, Fyffes, Fresh Del Monte Produce and Dole Food control the $7 billion global banana market (all figures US$).

“To ensure Chiquita has the premier and most sustainable platform in its sector, Chiquita will be able to access Cutrale-Safra’s substantial experience in all aspects of the fruit and juice value chain and extensive financial expertise,” the statement added.

Shares of Chiquita, which gained over 40 per cent since Aug. 11, when Cutrale-Safra made their takeover intentions public, added 1.4 per cent to $14.36 in New York. The shares shed two-thirds of their value over the past decade in the face of geopolitical instability in Latin America, price volatility and uneven demand for fresh produce around the world.

Cutrale-Safra face the challenge of maintaining Chiquita’s leading position in the banana market, bolstering slim margins and mitigating volatile operating conditions, analysts said. The entity resulting from the failed Chiquita-Fyffes merger would have been the world’s largest banana producer.

Shareholders of Chiquita will be paid $14.50 for each of their shares in cash, valuing the company at about $682 million. Cutrale-Safra will assume Chiquita’s debt, with Safra-controlled bank J. Safra Sarasin AG extending a buyback of the banana producer’s senior bonds due in 2021. The value of the deal, including debt, amounts to $1.3 billion, the statement said.

The deal comes as Safra, the world’s richest banker, continues to diversify his $16 billion fortune out of banking, finance and real estate. Faced with declining orange juice consumption globally, Cutrale and his family business are expanding into new regions and products after venturing into grain trading in recent years.

The transaction is subject to regulatory approvals and is expected to close by the end of the year or early 2015, the statement added.

“We look forward to working with Cutrale-Safra to ensure a smooth transition and complete the transaction as expeditiously as possible,” Chiquita CEO Ed Lonergan was quoted by the statement as saying.

— Guillermo Parra-Bernal and Sruthi Ramakrishnan report for Reuters from Sao Paulo and Bangalore respectively.

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JBS and banks are wary that market volatility stemming from uncertainty about the outcome of Brazil’s October presidential election could cloud sentiment ahead of potential investor meetings, according to the sources.

It was the second time Sao Paulo-based JBS has suspended the deal since June.

Other potential IPOs at risk include those of cellphone tower operator T4U Holding Brasil SA and vet product maker Ouro Fino Saude Animal Participacoes SA, which last month announced their plans, both sources said. The offerings were initially set to happen next month, between the first and second rounds of Brazil’s most unpredictable presidential election in 12 years.

A number of pension funds and asset management firms are wary over the impact of election-related risks, reduced global liquidity and an economic recession on the future performance of IPOs. The companies pushed forward with the deals after markets rallied in August on speculation that President Dilma Rousseff could lose the October election to a more business-friendly challenger.

The benchmark Bovespa stock index shed one per cent on Friday. The index, which jumped in August, has fallen 5.7 per cent since the start of the month, when Rousseff began to cut into the second round lead of opposition candidate Marina Silva.

“There’s too much noise at the moment,” said one of the sources, who sought anonymity since the decision is private.

The last time a Brazilian company listed shares on the Sao Paulo Stock Exchange was December 2013, when travel agency CVC Brasil Operadora de Turismo SA raised 540 million reais from investors. This year, IPOs in Brazil are likely to have their worst year in at least a decade.

The unit, which will be spun off under the name of JBS Foods, accounted for nearly 10 per cent of JBS’s US$40 billion in revenue last year. JBS aims to list the unit in the Sao Paulo Stock Exchange’s Novo Mercado chapter, where corporate governance rules are the toughest and requires that a company list at least 25 per cent of its shares.

Itau BBA SA, Banco Bradesco BBI and Bank of America Merrill Lynch are among the group of at least five banks that have been mandated for the JBS Foods transaction, the source added.

JBS declined to comment, citing a quiet period related to the JBS Foods IPO.

— Guillermo Parra-Bernal reports for Reuters from Sao Paulo, Brazil. Additional reporting by Gustavo Bonato in Sao Paulo.

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São Paulo-based JBS put off the deal in June, when slumping confidence drove potential investors away from Brazil, sources told Reuters at the time. JBS and banks want to kick off investor meetings in New York and other cities next week, said the source, who sought anonymity since the deal is in the works.

The transaction could be priced after the second half of October, between the first and second rounds of Brazil’s presidential election, the source added. In recent weeks, cellphone tower operator T4U Holding Brasil SA and vet product maker Ouro Fino Saúde Animal Participações SA filed for IPOs, as demand for Brazil issues gain traction amid speculation that market-friendly candidates could win the election.

“Timing will be crucial for the deal,” the source added. Itaú BBA SA, Banco Bradesco BBI and Bank of America Merrill Lynch are among the group of at least five banks that have been mandated for the transaction, the source added.

JBS declined to comment, citing a quiet period.

The unit, which will be spun off under the name of JBS Foods, accounted for nearly 10 per cent of JBS’s US$40 billion in revenue last year. JBS aims to list the unit in the São Paulo Stock Exchange’s Novo Mercado chapter, where corporate governance rules are the toughest and requires that a company list at least 25 per cent of its shares.

Last year, JBS acquired rival Marfrig SA’s Seara pork and poultry operations for US$2.7 billion, and assets from Canada’s XL Foods and Brazil’s Massa Leve for a combined US$210 million. [Related story]

Gloomy year

Prospects for Brazil’s equity markets and stock offerings have been gloomy this year, partly because of political uncertainty related to the election, bankers and investors say.

Stung by a string of deals in recent years that failed to deliver the promised returns, investors have become especially cautious in Brazil. About 40 of 117 IPOs priced since 2005 yielded returns above the benchmark CDI interbank lending rate, with the remainder losing on average half the amount initially invested, Credit Suisse Group AG and Thomson Reuters data said.

Despite the adverse outlook, equity investors still keep a watchful eye on Brazil because the country’s stock market is bigger, more liquid and more diverse than those in the rest of the region, bankers said.

— Reporting for Reuters by Guillermo Parra-Bernal in Sao Paulo.

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