MEAT processor JBS Australia has mounted a bid to secure a controlling interest in robotics and automation development company, Scott Technology, in a move obviously designed to deliver greater processing efficiency across the company’s operations.
With 300 meat processing units scattered across North and South America and Australia, parent company JBS is obviously strongly positioned to benefit from any emerging technologies in areas like robotics.
JBS Australia has already installed Scott Technology robotics in a major commercial trial its lamb processing plant at Bordertown in South Australia.
That project, covered in detail in this earlier Sheep Central article, and accessible in the short video published below, has delivered a range of benefits, including labour efficiency, speed of fabrication, better phytosanitary performance, and greater precision in cutting lines. Bordertown staff previously employed in the area now occupied by the automation project now work in other parts of the plant.
In a statement issued on Friday, JBS Australia announced that it had made a conditional offer to acquire a majority stake in the share capital of NZ stock exchange-listed Scott Technology (search: NZE: SCT or “Scott”).
Scott has operations throughout the world in a range of robotics fields covering industrial, mining and food processing, from automated welding machines to meat processing equipment. In the food and meat sectors, Scott is also a global leader in robotic and x-ray manufacturing technology.
The investment proposal from JBS to Scott shareholders is to acquire a minimum of 50.1pc of shares at an offer price of NZ$1.39 per share, with Scott’s market capitalisation at NZ$63.2 million.
According to today’s statement, the arrangement proposed is subject to existing shareholder approval and covers:
- A placement of 10 million shares at $1.39 to JBS to provide the capital that Scott is looking to raise
- An offer to purchase shares at $1.39 from any shareholder who would like to exit or reduce their shareholding
- A 1-for-8 non-renounceable rights issue at $1.39 for shareholders who do not want to sell but would like to increase their shareholding
- If required after a) through c) have been completed, a further placement at $1.39 to give JBS a shareholding of 50.1pc.
JBS has quickly erased any suggestion that the proposed deal is any attempt to ‘partition’ Scott’s technology for the company’s own use, at the expense of major competitors like Teys or NH Foods in Australia, or Tyson/Cargill in the US, for competitive advantage.
Today’s statement clearly says it is JBS’s intention to keep Scott as a “stand-alone business” and to “continue to servicing existing and new clients.”
JBS has an existing business relationship with Scott and is considered a key customer. Many of Scott’s current technology developments have been undertaken in conjunction with JBS in Australia and globally, the statement said.
JBS Australia chief executive Brent Eastwood said the proposed transaction would open-up additional opportunities for both JBS and Scott Technology.
“As a major international food company, JBS will benefit from access to Scott’s leading robotics and automation technologies. JBS will provide Scott with an enhanced commercial relationship base and access to capital to grow internationally,” Mr Eastwood said.
He said the company would remain a listed entity on the NZX, if JBS was successful in its move.
What JBS offers is the financial clout to help Scott grow its business significantly, both within Australia and overseas,” an onlooker told Beef Central.
“Every business that JBS has purchased or invested in in Australia has grown and prospered, as a result of the venture,” he said.
“This project is really about driving improved efficiencies in processing, right across the industry – not just for JBS – leading to higher farmgate returns.”
Beef Central understands that about $10 million in combined industry and government funding has been invested in Scott’s red meat processing automation technology so far. None of that has come from socialised industry levies, but only through direct investment by specific stakeholders through the MLA Donor Company.
The two key investors, matched dollar-for-dollar by the Federal Government, have been Australian Lamb Company (which has installed two Scott robotics units in its Colac and Sunshine, Vic plants; and JBS Australia, which has its first unit at Bordertown. beef Central understands the Bordertown installation alone cost around $8 million in total, mostly financed directly by JBS.
Scott Technology has previously indicated to its shareholders that the company was considering a capital raising to reduce debt following recent business acquisitions and to provide working capital to fund further growth.
Having started on this task, and after considering the company’s size and level of institutional interest in Scott, the company believed its growth aspirations would be best achieved with a “relevant industry- based cornerstone shareholder.”
Enter JBS, stage left.
Many of Scott’s current technology developments have been undertaken in conjunction with JBS in Australia and beyond.
“The required decisions to be taken are at the absolute discretion and control of shareholders,” Scott said in a statement. “The scheme requires a majority of all shareholders to gain approval and for this reason it is important that all shareholders have their say and vote on whether to approve the Scheme or not.”
It said a vote in favour of the scheme was not a vote to sell the Scott company, but a vote in favour of combining with JBS as a committed partner which would bring “substantial capital” to Scott.
If the scheme is approved, individual Scott shareholders will be able to decide on their own course of action. For shareholders that want to reduce or exit their shareholding, they would be able to sell shares to JBS at a set price without any associated fees. For shareholders that want to remain as a shareholder of Scott, they have the option to participate further through the rights issue or can remain with their current shareholding.
The investment is subject to a number of NZ regulatory approvals and with a number of authorities and procedures required to be considered, the Board expects the process to take several months to complete.