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New managers will make decision on buying XL within six months

FILE PHOTO: Security personnel patrol the XL Foods cattle processing plant in Brooks, Alta., Wednesday, Oct. 10, 2012. Food safety officials are reviewing a report on a pre-inspection of the Alberta beef plant that is closed over E. coli concerns.

Jeff McIntosh/The Canadian Press

A Brazilian-controlled company that is taking over management of an embattled Alberta meat-packing plant – at the centre of an E. coli outbreak and a massive beef recall – intends to make a decision on whether to buy the slaughterhouse within six months.

Talks between Edmonton-based XL Foods and JBS USA, a subsidiary of Brazil-based JBS S.A., began a while ago, but JBS spokesman Cameron Bruett would not reveal when exactly. Mr. Bruett said JBS and XL officials are now ironing out the management takeover of XL's Lakeside slaughterhouse in Brooks, Alta. The surprise agreement was announced late Wednesday.

"We've been having ongoing discussions with them [XL Foods] over an extended period of time. ... It takes some time to arrange a deal of that magnitude," Mr. Bruett said Thursday.

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"Suffice it to say we're going to have ongoing discussions to make sure that the partnership is positive for both entities," he added. "We'll be hashing out all those details over the coming days to make sure we have a seamless transition and that we can get that plant operational as soon as possible."

XL's Lakeside plant, purchased by privately held Nilsson Bros. of Edmonton in 2009, had its licence to operate suspended on Sept. 27 after tainted beef products were exported to more than 20 countries, including the United States, a major consumer of Canadian beef. At least 15 Canadians in four provinces fell ill with E. coli O157:H7 after eating meat processed by the XL plant. The beef recall is the largest in Canadian history.

XL Foods is the second-biggest meat packer in Canada. The new management agreement gives JBS USA the exclusive option to purchase the Lakeside plant as well as XL's beef-packing operations in Calgary and the U.S. A feedlot and farming operation near Brooks are also on the table. If the purchase agreement goes ahead, JBS USA would pay $50-million (U.S.) in cash and $50-million in JBS S.A. shares.

The biggest shareholders of JBS S.A. are its founding family and the Brazilian government. JBS S.A. is the world's largest protein company with 301 production facilities worldwide and more than 135,000 employees. Its U.S. arm will run the Canadian plant.

Mr. Bruett said he expects JBS USA will decide within six months whether to buy the beef-processing plant in Brooks and XL's other holdings. The deal would give JBS a foothold in Canada – and major one.

"We're present in all the major beef-production regions across the globe," Mr. Bruett noted. "Canada has an excellent beef industry, quality cattle. XL has excellent operations, so it was a very attractive opportunity for us and we look forward to exploring the option."

The management change seemed to catch everyone off guard Wednesday, but was welcomed by the federal and provincial governments, the Canadian Cattlemen's Association and the union representing XL's 2,200 workers, many of whom are new immigrants and worried about long layoffs. Canadian cattle ranchers, too, are anxious to see the slaughterhouse reopened.

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In a statement Wednesday., XL co-CEO Brian Nilsson said the management agreement with JBS is "another positive step to relicensing" the Lakeside plant.

Last week, the Canadian Food Inspection Agency (CFIA) gave the company the go-ahead to resume limited operations. The agency has assured the public that no meat would leave the slaughterhouse until it was proven safe for consumption.

"The CFIA's decisions have been and continue to be based on scientific evidence and a precautionary approach to protect consumers," the inspection agency said in statement. "… Any change in management or ownership at XL will not affect our assessment."

Sylvain Charlebois, a food safety researcher and associate dean at the University of Guelph's College of Management and Economics, noted JBS is the premier producer in Brazil's burgeoning beef industry.

"Brazil has become an agricultural powerhouse, and this is obviously a good move for them because Canada really offers a model in which it's cheap to produce bovine protein," he said. "This could – could – help the Canadian beef industry enter other markets, particularly South America."

With a report form Anna Mehler Paperny

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About the Authors
National news reporter

Renata joined The Globe and Mail's Toronto newsroom in March of 2011. Raised in the Greater Toronto Area, Renata spent nine years reporting in Alberta for the Calgary Herald and the Edmonton Journal, covering crime, environment and political affairs. More

Parliamentary reporter

Josh is a parliamentary reporter in Ottawa. Before moving to the nation's capital in 2013, he covered provincial affairs in Edmonton and throughout Alberta. He joined the Globe in 2008 in Toronto before returning to his home province in 2010. More

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