JBS Vote Spurs SEC Probe Request From Rand Paul
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Kentucky Sen. Rand Paul has asked the top U.S. securities regulator to probe two major firms that have advised their clients to vote against a proposed New York listing by JBS SA, the world’s largest meat producer.
The Republican lawmaker urged the U.S. Securities and Exchange Commission to review recent assessments made by Institutional Shareholder Services Inc. and Glass Lewis & Co., according to a May 16 letter sent to the agency’s chair Paul Atkins seen by Bloomberg. The companies advise the likes of hedge and mutual funds on shareholder votes.
Shareholders in Brazil’s JBS, which has beef, chicken and pork operations stretching from Colorado to New Zealand, will meet on May 23 to vote on the plan to sell shares in New York. The proposal, made public about two years ago and approved by the SEC last month, has drawn opposition from environmental groups, advocacy investors and politicians from both sides of the aisle due to governance and environmental concerns.
JBS USA Holdings ranks No. 68 on the Transport Topics Top 100 list of the largest private carriers in North America.
Paul. (Kent Nishimura/Bloomberg)
“The recommendations to oppose this transaction are troubling, as they fail to consider the billions of dollars in potential value that could be realized from this listing,” Paul wrote in the letter, urging the SEC to examine whether their assessments “omitted key information or were affected by undisclosed conflicts of interest.”
A spokesperson for Paul confirmed the authenticity of the letter. Glass Lewis and JBS declined to comment. ISS and the SEC didn’t respond to requests for comment.
ISS and Glass Lewis advised investors to vote against JBS’s New York listing because the dual-class share structure proposed is set to reduce minority shareholders’ voting power. That will leave power concentrated in the hands of the Batista brothers, who control the company and whose past involvement in corruption scandals in Brazil add to governance concerns, the firms said.
RELATED:JBS Profit Jumps as Chicken Gains Beat Beef Downturn
Senator Paul argued that JBS shareholders and employees, many in the state of Kentucky, would benefit from the “enhanced governance, transparency, and market access” that come with a New York listing, according to the letter. The meat packer has two plants in the state processing chicken and pork.
Mason Capital Management LLC, which said it owns 2.4% of JBS, also called on the SEC to investigate ISS and Glass Lewis. Their recommendations “suffer from multiple deficiencies” and are “politically motivated,” Mason founder Michael E. Martino said in a May 15 letter to the SEC. Martino said the firms “derive substantial revenue from institutional clients with strong ESG mandates.” Mason Capital declined to comment.
JBS’s reorganization proposal stands to benefit minority shareholders by unlocking stock value and reducing funding costs while increasing transparency, the company said in two different filings last week in response to the ISS and Glass Lewis recommendations.
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