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In an unusual move, Brazil-based meat packing conglomerate JBS has put off a formal U.S. IPO so many times that Brasilia is fining the company $300 million for stalling.

Until the IPO finally materializes, JBS, the world’s biggest beef producer, is thinly traded in over-the-market ADR format as OTCQX:JBSAY . Nonetheless, its bonds are probably better known to investors — and they are plunging as the markets digest the size of the fine.

JBSAY only earned $80 million last quarter, so a $300 million penalty could potentially wipe out the already debt-burdened company’s net profits for a year or more.

The company has blamed volatile capital markets and its own fundamental pressures — a strong real curtailing the competitive strength of its exports and surging cattle prices cutting into its margins — for pushing off an IPO twice this year. A tentative window of late 2011 is now planned.

However, the real story seems to be that JBSAY is reluctant to do the deal until it can resolve the overhang of the Brazilian government using the offering as an opportunity to convert $2 billion in bonds into a bigger equity stake.

One option that has been promoted in the press would be to set up a reverse merger between JBSAY and its U.S. subsidiary Pilgrim’s Pride (NASDAQ:PPC). This would free the company from some of what it apparently considers the onerous prospect of increased government control.

In any case, unless JBSAY gets its stock traded more widely in the United States — in one form or another — the prospect of a merger with U.S. pork producer Smithfield (NYSE:SFD) seems dead for the time being. Bad news for SFD shareholders hoping for a white knight.

Disclosure: No positions

Source: JBS Punished for Slow IPO