September 17, 2009

Brasil Foods SA (BRF), the merged entity of Perdigao and Sadia, may feel the antitrust pressure on them taken off as other Brazilian meat companies move on to make similar huge merger deals.

The merger of Perdigao and Sadia gave BRF a 75 percent market share of frozen foods, and both companies had strong presence in Europe, Russia and the Middle East.

Brazil's antitrust agency CADE, which must approve the merger, has been reviewing the deal since May, and has not yet decided what divisions or products the newly created BRF would have to sell in order to allow the deal to pass through.

But the latest move acquisition moves by JBS and Marfrig could help ease the pressure.

JBS has bought majority stakes in Bertin and Pilgrim's Pride, while Marfrig will buy Cargill's Brazilian unit Seara Alimentos Ltd., for US$900 million.

The deals will see the two companies balloon up considerably, with Marfrig having a sizable chicken and pork business in Brazil while increasing its packing capacity to about 2.2 million chickens per day, compared with BRF's 3.5 million.

The Marfrig acquisition, which produces a powerful competitor that could very well take away market share from BRF, now gives Perdigao and Sadia a stronger argument against selling off some of its assets, said analysts. 

Marfrig has been going on a shopping spree in the poultry industry in the past one year, buying European chicken company OSI Group for US$680 million in November 2008 and acquired chicken company Doux Frangosul for about US$32 million in June.