BBD Banco Bradesco SA

SÃ O PAULO—Legal woes dogging the head of Brazil's JBS SA could delay plans by the world's largest meatpacker to list its shares on the New York Stock Exchange, many analysts and investors say, a potential blow for the company at a time when investors are increasingly skittish about any bad news out of Brazil.

JBS Chief Executive Wesley Batista has been absent from the firm since last week, barred by a court order from managing any business while police investigate suspected corruption at a paper pulp company owned by the Batista family's investment company J&F Investimentos SA. The order also applies to Mr. Batista's brother, Joesley Batista, who is chairman of JBS. The two brothers are suspended from managing their companies until the end of the investigation, unless the current order is overturned by the court.

JBS has said little about Mr. Batista's whereabouts or potential plans for replacing him. That is raising fears among investors and analysts that his close ties to Brazil's government, which has been upended by a series of graft scandals, could weigh on the meat company and postpone JBS's plans for a global reorganization that many analysts say would boost the firm's sagging value.

A JBS spokeswoman said Monday that the company hasn't changed its plans regarding its reorganization. A spokesman for J&F has denied wrongdoing by the Batistas and by the pulp company, Eldorado Brasil SA. Through their company spokespeople, Wesley and Joesley Batista declined to comment.

JBS, a major player in the U.S. market through its ownership of chicken producer Pilgrim's Pride and meat processor Swift & Company, announced in May it would spin off its international businesses into a new company called JBS Foods International.

The new firm would be based in Ireland, with its shares listed on the New York Stock Exchange. JBS SA shareholders would initially receive one share in the new company for every share they already own in the parent company. JBS SA shareholders would then be offered the chance to trade in their JBS SA shares for more shares of Foods International, and if 50% or more of JBS SA shares are traded in, Foods International will become the controlling company of JBS SA.

"Our feeling is that the new (corruption probe) will at least delay" the NYSE listing, said Guilherme Figueiredo, a fund manager at Sã o Paulo-based investment firm M. Safra.

Analysts at Brazil's Banco Bradesco BBI and Itaú BBA investment banks have also expressed concerns that the Batista brothers' legal problems could delay the reorganization, as have several investors.

Mr. Figueiredo said JBS, which posted $163 billion reais ($50.3 billion) in global net sales in 2015, is a solid operator. Even so, he said M. Safra dumped JBS shares from its portfolio a year ago over fears that its deep Brazilian government connections could prove a liability as the nation's graft probes have expanded. Brazilian government entities own more than one-quarter of JBS shares, part of a state strategy to turn the meatpacker into a globally competitive player.

The Batista's legal troubles stem from a massive police operation launched last week targeting more than 100 individuals and businesses across Brazil. Dubbed Operation Greenfield, the probe is aimed at uncovering alleged malfeasance at four state pension funds that allegedly overpaid for stakes in Brazilian-owned companies, including Eldorado.

Other recent investigations into alleged overbilling linked to government contracting have turned up evidence that some of the funds were used to pay bribes and kickbacks to politicians.

JBS's share price dropped 10% on Sept. 5, the day police raided the offices Eldorado and brought in Wesley Batista for questioning. Joesley Batista, who is CEO of J&F, was out of the country the day of the raid and is scheduled to be questioned by police this week. The company's shares closed at 11.62 reais on Monday in Sã o Paulo, down 6.7% from when the probe was made public.

There is no indication that JBS was a target of Operation Greenfield. But on the day of the raids, the judge overseeing the probe ordered that the Batista brothers and another 38 people under investigation halt all their management activities at any companies where they work.

That order has led some analysts to question whether Wesley Batista will be able to stay on as JBS's chief executive. The company declined to say if Mr. Batista would stay on as CEO.

If top management at a company is under investigation, it could scare away investors, even if the investigation is focused on a different business, said Jonathan Macey, a professor at Yale Law School who teaches a course on ethics in capital markets.

If a CEO and a chairman "are seen as untrustworthy, that is a problem," said Mr. Macey.

Analysts say JBS was already undervalued compared with its peers even before Mr. Batista was suspended from the company, due in part to its location in Brazil, where borrowing costs are sky-high. The reorganization was expected to give JBS access to much cheaper financing and boost its standing with foreign investors.

It would have given JBS "a different kind of cachet," said Jason DeVito, senior analyst and portfolio manager at Federated Investors Inc.

JBS is the focus of a separate probe into Brazil's national economic development bank, known as BNDES. Authorities are investigating whether the meatpacker received favorable treatment from the taxpayer-funded lender, which bankrolled an acquisition spree that turned JBS into the world's biggest protein producer.

BNDES didn't immediately respond to request for comment.

BNDES invested a total of 10.6 billion reais in JBS from 2005 to 2014, leaving it with 20.4% of the company's shares, the second-biggest stake after J&F's 42.4%. State-owned lender Caixa Economica Federal owns another 6.5% of JBS shares.

Several investors and analysts interviewed by The Wall Street Journal praised the company's management and success in effectively integrating the acquisitions into JBS. Several also said the company has a deep bench of management talent capable of stepping in to take over for Wesley Batista, should he need to step aside.

"Chinese consumers aren't going to stop eating beef," said Paul Lukaszewski, head of emerging-market credit research at fund manager Aberdeen Asset Management PLC.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com and Luciana Magalhaes at Luciana.Magalhaes@wsj.com

(END) Dow Jones Newswires

September 12, 2016 20:35 ET (00:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.