"There are no limits" to expansion opportunities, says José Batista Jr., the founder's 48-year-old eldest son, who is member of the JBS board.

The senior José Batista got his start a half century ago buying cows and selling them to meatpackers in Anápolis, in the Brazilian state of Goiás. Feeling that meatpackers were underpaying him, in 1953 he opened a butcher shop and began slaughtering one cow a day. In 1957, as Brazil government was moving the capital from Rio de Janeiro to Brasília, Mr. Batista followed, opening one of the first slaughterhouses in the region.

As Brazil's economy expanded, meat consumption grew, and so did Mr. Batista's business, which he named Friboi. Between 1993 and 2005, the company acquired 12 meat-processing companies, becoming one of Brazil's biggest beef producers.

His three sons -- José Batista Jr., known as "Junior;" Wesley, 38; and Joesley -- skipped college to work at the company, starting out by supervising workers who skinned and deboned cows. Three Batista daughters helped with administrative and managerial tasks.

Today the brothers call the shots at JBS, although their father, now 74, continues to advise them and to help buy and sell cattle. Every Sunday, the family gathers at his home outside São Paulo, or on a telephone conference call, to discuss the week's activities. The brothers talk almost every day by phone.

In 2004, the company moved its headquarters to an old meatpacking plant in São Paulo, where the senior Mr. Batista had sold cattle decades earlier. The company was thriving, and the Batista family routinely traveled over the city by helicopter and to their ranch on the Paraná River -- where they entertained customers and prospective investors -- by private jet.

Friboi rankled some Brazilian ranchers. In 2005, the Brazil-based National Agriculture and Cattle Federation filed a price-fixing claim against a group of meatpackers, including Friboi, alleging that they kept cattle prices artificially low. Before the investigation was done, Friboi reached a $13.8 million settlement with the government. Later, four other meatpackers were declared to have formed a cartel and were fined 5% of their 2004 revenue. The Batistas say the matter is behind them.

Foreign Acquisition

In 2005, the company made its first foreign acquisition, buying Argentine meatpacker Swift Armour. In 2006, the company changed its name to JBS -- the senior Mr. Batista's initials. The following March, JBS went public on the Brazilian stock exchange, becoming the first Brazilian meat company to do so. The offering raised nearly $800 million to expand further in South America.

By then, Brazil's currency, the real, had appreciated against the dollar. That made Brazilian exports more expensive, slowing export growth. Since more than one-third of JBS's beef is exported, that presented a challenge.

It also offered an opportunity. "Foreign assets became very attractive," says Marcus Vinicius Pratini de Moraes, a JBS board member and former agriculture minister in Brazil. "Instead of complaining that was hurting exports, [the Batistas] looked at alternatives."

Establishing a presence outside South America, the family felt, would help JBS hedge risks of trade barriers and sanitary restrictions, which threaten beef processors whenever there's a disease outbreak like mad cow. Exporting fresh Brazilian beef to many European countries, for example, requires time-consuming inspections due to concerns about foot-and-mouth disease. JBS now can export beef there from its Australian facilities.

The Batista brothers had been touring meatpacking facilities for years, trying to figure out how to get better access to global markets. During a trip to Egypt around 2000, Wesley Batista saw a market for halal beef, which is produced according to Islamic law; the family then adapted some of its packing plants to produce beef that way.

JBS moved to provide more options suited to cultural preferences -- livers in Egypt, tripe in Spain, heart in Russia. "You can't just sell rib-eyes around the world," says Andre Nogueira, chief financial officer of JBS's U.S. operations.

The world's biggest beef-consuming market, the U.S., was a logical target. The American market has long been fragmented. U.S. meatpackers have little control over the supply of cattle. Unlike chicken and pork producers, they rarely own the animals before they go to slaughter. For years, meatpackers have had excess slaughtering capacity, making their plants inefficient.

Swift & Co., which traces roots to the 19th century, had been struggling with its beef business for years. In December 2006, Immigration and Customs Enforcement officials raided Swift plants in six states, arresting more than 1,000 workers. Swift estimated that the incident cost it about $50 million. In January 2007, Swift announced it was considering a sale.

JBS had been interested in the company for years. At least two other big meat companies, Cargill and Smithfield Beef, also expressed interest in buying it. In May 2007, JBS agreed to buy it for about $225 million, plus the assumption of $1.23 billion in debt. In order to complete the deal during the U.S. credit crunch, JBS turned to Brazil's government bank for $600 million of equity financing, which left the bank with a 13% stake.

In December, JBS bought a 50% stake in Italian meatpacker Inalca, a unit of Cremonini SpA, largely because of its operations in Russia, Eastern Europe and North Africa, all growing beef markets.

In March, JBS said it was buying National Beef Packing, the fourth-largest beef processor in the U.S., Tasman, the Australian beef processor, and Smithfield Beef, the fifth-largest U.S. beef processor.

In the U.S., the Smithfield and National Beef deals still must be cleared by the Justice Department on antitrust grounds. If they go through, JBS will be the largest U.S. meatpacker, controlling about 30% of U.S. beef processing, according to Cattle Buyers Weekly. Some American cattlemen, worried that decreased competition will cause cattle prices to fall, have urged the Justice Department to block the two deals.

Late last year, JBS restarted a second shift at one of its Greeley, Colo., packing plants, returning about 1,350 workers to the payroll. Its goal is to run the plant more efficiently, which means processing more cattle -- even if that requires bidding a bit more for cattle over the short term.

Some analysts think JBS will try to use its deep pockets to take market share away from its competitors. "These guys have a lot of money," says Rich Nelson, director of research at commodity-research company Allendale Inc. in Chicago. "The game," he says, is to see which company can tolerate losses "for the longest period of time."

By  Lauren Etter and John Lyons

Source: Wall Street Journal (www.wsj.com)