Respective boards of directors of Marfrig Global Foods S.A. and BRF S.A. have signed a memorandum of understanding (MoU) allowing the two firms to discuss the possibility of a business merger, according to a statement on the web pages of both parties.
Valid initially for a period of 90 days with the option for 30-day extension, the MoU covers the rules and conditions for access by representatives of the two parties to each other’s businesses. Neither company may begin negotiations with any other party while the MoU is in operation.
Except for the MoU, both firms stress there is no agreement — binding or non-binding — for any transaction to be implemented.
If an agreement can be reached between the two parties, a world leader in the protein market would be created, with wide geographical and product diversification. Not only would such an entity be able to exploit financial and operational synergies, but it would also be exposed to lower business risk. The two entities have operations in Brazil, Latin America, the U.S., the Middle East and Asia.
According to information published by BrazilJournal.com, the two “reached an agreement in principle to merge their operations, creating a diversified protein giant with an annual turnover of close to BRL80 billion (US$20.2 billion).”
As reported, BRF shareholders will own 89.98% of the merged company, while those of Marfrig will keep 15.02%. This proportion, as reported, was established “based on the market value of the last 45 days and did not attribute premiums to any of the parties.”
According to Bloomberg, the combination of BRF’s chicken business and Marfrig’s beef operations could potentially be the world’s fourth largest meat company by sales.
One important aspect of the potential merger is the fact that the BRF conglomerate will have a presence in the United States, where Marfrig owns National Beef Packing Co., the fourth largest beef company in the U.S. In addition, Marfrig acquired Quickfood, a few months ago, in Argentina, from the same BRF. In this way, the company will be able to sell the three main animal proteins: poultry, beef and pork with scales and with operational synergies and the cost of the debt.
In the Poultry International Top Poultry Companies database, BRF is the world’s third largest poultry meat producer, processing more than 1.6 billion birds annually.
Marfrig Global Foods is among the world’s largest producers of animal proteins, with production, sales and distribution units in 13 countries. In recent years, it has divested its poultry businesses, Keystone Foods, Moy Park and Seara.
