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Pilgrim's Pride to pay $1 billion for parent JBS' U.K. food unit

By Guillermo Parra-Bernal and Tatiana Bautzer

SAO PAULO (Reuters) - Brazil’s JBS SA agreed on Monday to sell a British poultry unit to subsidiary Pilgrim's Pride Corp <PPC.O> for $1 billion, suggesting that the world’s No. 1 meatpacker is trying to protect revenues in more profitable activities abroad as it faces a corruption scandal at home.

In a statement, U.S. poultry company Pilgrim's Pride said the purchase of Moy Park, a major supplier of chicken in Western Europe, was negotiated and approved by a special committee comprised of three independent board directors.

The committee "was advised independently and had been granted full authority" over all aspects of the transaction, the statement said.

Under the terms of the purchase, which will be funded with cash and debt with parent JBS, Pilgrim's Pride will allow Moy Park to remain based in Craigavon, Northern Ireland. Management at Moy Park, led by Chief Executive Officer Janet McCollum, will stay.

Pilgrim's Pride slumped 5 percent to $27.63 a share in Nasdaq trading. Shares in JBS <JBSS3.SA> added 1.6 percent to 8.32 reais.

The deal's unusual structure comes as JBS struggles with fallout from a corruption probe ensnaring controlling shareholders Wesley and Joesley Batista.

It also puts JBS near completion of an asset sale plan unleashed by the Batistas' admission to bribing 1,893 politicians in Brazil over the past decade.

According to two people familiar with the deal, Moy Park's purchase should help JBS boost the allure of assets it plans to list in the United States by the end of next year. The deal, said one of them, is a "transfer of assets" that helps protects revenue at a holding firm grouping JBS' non-Brazilian assets.

"It's a plus as JBS continues to pursue the initial public offering of JBS Foods International," as the holding company is known, said the person, who requested anonymity to speak freely about the issue.

Moy Park accounts for about 25 percent of chicken consumed in Western Europe and is one of the top 10 food companies in the United Kingdom.

JBS paid $1.5 billion for Moy Park about two years ago.

The Brazilian company has controlled Pilgrim's Pride since 2009 after paying $2.8 billion for a stake that now is about 75 percent.

'ACCRETIVE'

JBS said in a separate statement that it plans to use proceeds from the sale of Moy Park to accelerate short-term debt repayments.

In July, the Batistas and JBS agreed to the sale of Moy Park and other assets as a way to secure the refinancing of 20.5 billion reais ($6.7 billion) in loans maturing within the next 12 months.

The Batistas are also facing a series of probes and a rift with minority shareholders of JBS, who are demanding the removal of Wesley Batista as chief executive officer.

Barclays Plc acted as financial adviser to Pilgrim's while Evercore Inc worked with Pilgrim's special committee.

Some companies that had expressed interest in purchasing Moy Park included China's WH Group and subsidiary Smithfield Foods Inc, buyout firm CapVest Partners LLP and France's Groupe Bigard.

Pilgrim's expects the Moy Park purchase to add $2 billion in annual revenue and reduce costs by $50 million over the next two years. The combination should be "immediately accretive to earnings per share," said the statement, noting the bid for Moy Park valued the entire company at $1.3 billion.

(Additional reporting by Vibhuti Sharma in Bengaluru; Editing by Shounak Dasgupta, Bill Trott and W Simon)