(Recasts to add details on debt accord, comments, updates share performance throughout)
By Rodrigo Viga Gaier and Guillermo Parra-Bernal
RIO DE JANEIRO/SAO PAULO, Sept 18 (Reuters) - JBS SA's weekend move to replace the Brazilian company's jailed chief executive with his father showed "deviousness" and left in place a situation of "terrible governance" at the world's No. 1 meatpacker, the head of state development bank BNDES said on Monday,
In remarks to Reuters, BNDES President Paulo Rabello de Castro condemned a decision made "in the dead of night" over the weekend to put JBS founder José Batista Sobrinho in charge after his sons were arrested for alleged insider trading.
"I see deviousness in what was done," Rabello said. "A meeting of that magnitude cannot be called at the last minute."
The weekend decision to install Batista Sobrinho, 84, as the company's new CEO, further raised tensions between BNDES and JBS, which became the world's No. 2 food processor in less than a decade largely thanks to fresh capital from the development bank. The bank is also the company's second-largest shareholder.
Rabello also said the Batista family, which owns a 42 percent stake in JBS, lacks the sensibility needed for corporate governance, and called on markets watchdog CVM to investigate the "surprise" weekend meeting.
BNDES owns 21 percent of JBS and has led a push by minority shareholders to remove the Batistas from management since Wesley and Joesley Batista, formerly chief executive and chairman, respectively, testified in a plea deal to bribing hundreds of lawmakers.
The rift between the bank and the Batistas has widened as the plea deal ensnared Brazilian President Michel Temer in a corruption scandal. Rabello was appointed to run BNDES shortly after the plea deal - igniting concerns of a potential vendetta.
A person with knowledge of the Batistas' thinking told Reuters on Monday that they want to keep a family member in command because commercial lenders asked that as a prerequisite to refinance almost 21 billion reais ($6.7 billion) worth of loans maturing within the next 12 months.
Still, representatives from three of the five banks that signed the July 25 accord denied having demanded that. One of them, speaking on condition of anonymity, had expected Wesley Batista to stay for a short period to help finalize a series of asset sales pegged to the refinancing.
Reuters reported on July 13 that state-controlled Caixa Econômica Federal SA and Banco do Brasil SA, as well as private-sector peers Banco Santander Brasil SA, Banco Bradesco SA and Itaú Unibanco Holding SA were participating in the refinancing plan.
"We didn't ask that - in fact, we all expected a smooth management transition," said one of the banks' representatives.
Itaú, Banco do Brasil and Bradesco declined to comment. Santander Brasil and Caixa Econômica did not have an immediate comment.
JBS said in a statement that the Saturday meeting was called on Thursday and attended by all board members, adding that the vote was unanimous. Rabello said he was unaware of the board meeting and criticized a representative for BNDES's investment arm BNDES Participações for taking part.
BNDESPar, as the investment arm is commonly known, has no plans to sell any of its JBS stake due to the rift, Rabello said.
Shares of JBS closed 4 percent down at 8.50 reais on Monday, as traders worried that a battle between its two biggest shareholders may distract management from efforts to sell assets, protect margins and reduce debt.
Monday's decline was the steepest since Sept. 5, increasing the stock's rout this year to 25 percent.
Batista Sobrinho is retaking the reins of his family's global meat empire as his sons have become increasingly entangled in the graft investigation.
Joesley Batista surrendered to police after recordings suggested he tried to take advantage of prosecutors and conceal details during negotiations that led to the May plea deal. He and his brother also have been accused of dumping JBS shares ahead of that plea bargain.
The elder Batista will be closely advised at JBS by top executives including Chief Operating Officer Gilberto Tomazoni; André Nogueira, who heads the JBS USA unit; and Wesley Batista Jr., the 25-year-old son of Wesley Sr., who is the head of JBS USA's beef division. ($1 = 3.1358 reais) (Additional reporting by Tatiana Bautzer in São Paulo; Editing by Christian Plumb and Jonathan Oatis)