A Swift Exit

Late last year, Swift & Co. made national headlines after federal immigration agents conducted a six-state, simultaneous raid on six of the company’s beef and pork processing plants. Around 95% of the arrested workers were charged with some form of immigration violation – either in the U.S. illegally or unable to produce proper documentation — while the remainder were alleged to have taken part in the ID thefts.

At the time, folks like me wondered if it would be just another nail in the coffin for HM Capital, which has not raised a new fund since 2000. But neither Swift nor HM was charged with any crime, and the raid had seemingly little effect on acquisition discussions that had begun several months earlier.

Moreover, the talks bore beef – with today’s announcement that HM has agreed to sell Swift to J&F Participações SA, which controls Latin America’s largest beef processing company JBS SA.

The deal values Swift at approximately $1.4 billion, including $225 million in cash and the assumption of $1.2 billion in debt. This represents a 2x return for HM Capital, based on its initial $200 million equity investment and a prior dividend recap of just over $170 million. Not huge money given the five-year investment, but nonetheless impressive given the beef market’s recent travails. It also is worth noting that HM partner Edward Herring tells me that the original purchase price was approximately $1.1 billion, rather than previously reported figures of between $1.4 billion and $1.5 billion. He says the discrepancy is based on false assumptions that ConAgra had included its cattle-feeding division in the initial sale.

I also asked Herring about another fundraising attempt, but he demurred. That usually means all systems go…