May 31, 2019

BRF and Marfrig to merge businesses

BRF SA and Marfrig Global Foods SA have announced exclusive talks for a potential tie-up that would create the world's number four meat producer, according to securities filings, reported Reuters.

A deal could combine BRF's poultry business, which leads the world in chicken exports, and Marfrig's beef business, which is second to JBS SA globally. Their combined market capitalisation was 27.8 billion reais (US$7 billion) at Thursday's market close.

The companies said they were entering a 90-day negotiation period to define the terms of a deal, but an initial valuation suggested BRF shareholders would hold a stake of about 85% in a combined company, with the rest held by Marfrig shareholders.

The two companies were also attracted by their complementary geography, according to sources. BRF has a strong presence in the Brazilian market and exports mainly fresh poultry. Marfrig has a stronger US presence after acquiring National Beef last year.

A source said they could reap cost savings of up to 5.5 billion reais over four years.

That source said the combined company would be the world's fourth-largest meatpacker after JBS, Tyson and WH Group Ltd.