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CRESUD Acquired the Agricultural and Livestock Share of Swift Armour

Friday, July 4, 1997

Soros bought 90,000 head of bovine cattle. The operation, which was closed yesterday for 25 million dollars, also includes 50 thousand hectares (123,553 acres). Now the Hungarian tycoon is the main cattle breeder in Argentina. He has 170 thousand head of bovine cattle and 400 thousand hectares (988,421 acres).

The agricultural and livestock firm Cresud paid 25 million dollars to Swift Armour cold storage plant for 51,000 hectares (126,024 acres) distributed in the provinces of Santa Fe and Chaco, and 87,000 head of cattle. The deal shook the market, not so much because of the amount of money involved but also because of the characteristics of the deal: experts claim that this is the biggest purchase of cattle made in one operation of the last decades. And also that this makes the firm the biggest cattle owner in Argentina.

It had already become the main land owner. Cresud is, together with IRSA, multimillionaire George Soros¹s Argentine stake. With yesterday¹s deal, he enhanced his profile as one of the main agriculture and livestock producers in the country. His assets encompass 400 thousand hectares (988,421 acres, which is 20 times the surface of the city of Buenos Aires) and 161,000 head of cattle.

The Cattle King

Clarisa Lifsic, thirty something economist of Cresud board of directors, explained to Clarín the reasons for the deal: "We want to take high stakes in the meat business, because we estimate a marked growth from now on." And she announced that they expect to get no less than 40 per cent of the company turnover during the next twelve months. In the livestock sector, there are many who are already talking about the livestock business revival. Until now, the countryside boom had been almost exclusively based on agriculture, an activity which was favored by more than attractive international prices. This boosted the advance of cropland over pastureland. But the trend seems to have started to reverse. The drop of the grain prices is being accompanied by more chances to export meat. For two reasons: the stamping out of foot-and-mouth disease and the opening up of new markets.

For Cresud people it was a deal which could not be missed. "It was a unique opportunity: nobody in present-day Argentina can buy that quantity of cattle in only one operation", said Lifsic. Stock Exchange Reports state that 6 million dollars were paid for the land, which means 117 dollars per hectare (2.471 acres). The fields are located in the north of the province of Santa Fe and south-east of the province of Chaco: Establecimiento El Ñacurutú, in the north of Santa Fe on provincial road No. 3, with a surface of 30,350 hectares (74,996 acres); Establecimiento Tapanegá, of 20,832 hectares (51,476 acres), including crops and buildings.

By virtue of the same deal, Swift undertakes to transfer the lease and capitalization contracts to Cresud. These have to do with a surface of about 170,000 hectares (420,079 acres) which are rented by Swift, mostly in the same region. They also transfer machines, equipment and tools, vehicles and other movables belonging to Swift within the above fields. For the 87,093 head of bovine cattle and 1,640 horses, Cresud paid 19 million dollars, which are equal to 218 dollars per head. Cattle type is the one most commonly found in the northern region: breeding cows hybridized with some zebu blood, with a great hardiness and adaptation.

Investment bank Caspian Securities took part in this business deal thanks to the power conferred by Swift. Cresud¹s growth, just like that of its "cousin" IRSA has been explosive since the arrival of the "Soros¹s Boys". In September 1994, the company had a market capitalization of 20 million dollars. Less than three years later, this value grew almost 15 fold: exactly 297 million.

The last income statement showed net profits of 3.7 million pesos and a net worth of 184 million pesos.

The seller

Swift belongs to the US multinational Campbell Soup. His number one man in Argentina is Carlos Oliva Funes, who yesterday told Clarín that the deal includes Cresud¹s commitment to supply Swift cold storage plant with cattle for slaughtering. A year ago Campbell decided to divest itself of all the assets which are not central to their main business. When Swift had undertaken livestock production as part of its vertical integration, there were big price differences between the live weight price in winter and in the early spring on account of seasonal reasons. But livestock production, which previously reached a 40 per cent of the cattle slaughtered by Swift, today only contributes a 5 per cent.

Swift sells 250 million. It is the main exporter of value added products in Argentina. It has an 80 per cent of the domestic markets in canned food, foie gras and corned beef. Now it is beginning to incorporate sausages. And from its Rosario-based plant, which is reputed to be the most modern in the world, it will start producing Campbell soups and V8 juice for the entire Mercosur. According to Oliva Funes, Campbell is the second food brand in the US after Coca-Cola, with 8,000 million dollars in sales. And Swift is the operational base for Mercosur, considering that the company has no industrial plant in Brazil.

To sum up, now Soros, who had achieved a strong position in the urban and rural real estate business (respectively through IRSA and Cresud), is also the main Argentine cattle breeder. In this ranking he is followed by Pilagá, a half-Belgium and half-Argentine company, and the Fortabat conglomerate. The deal with Soros was decided after six months of haggling in a bid in which the all the offers were pretty close.

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