June 24, 2008

Marfrig to double annual sales with purchase of Group OSI

The deal will likely involve some kind of future equity issuance, Ricardo Florence, Marfrig's director of investor relations, said Monday (June 23, 2008).

Marfrig will pay US$400 million in cash to acquire the assets of Group OSI in Brazil and Europe and will pay the remaining US$280 million in some form of equity deal. The total deal is valued at US$680 million.

"Marfrig will pay for the remaining part of the acquisition via some kind of capital markets issuance," Florence said at a press conference in Sao Paulo.

Marfrig may also make an additional payment of US$220 million based on future performance.

Group OSI has a total of 15 units spread across Europe and Brazil. The company's Brazilian and European assets produce net annual revenue of US$2 billion.

Marfrig said it expects to conclude the Group OSI acquisition in the second half of 2008. The deal must be approved by local authorities.

Marfrig last year spent 1.1 billion Brazilian reals (US$682 million) in acquisitions and, excluding Group OSI, the company has invested BRL340 million in acquisitions this year.

The acquisition is part of an internationalization process among Brazilian beef companies.

Marfrig has expanded in Brazil, Argentina, Uruguay, the UK and the U.S. in recent years as it seeks to win market share from JBS SA, the world's biggest beef producer. Marfrig's expansion into poultry and processed foods such as chicken nuggets and hamburgers also makes it a rival to Perdigao SA and Sadia SA, Brazil's top foodmakers.

However, Marcos Molina, Marfrig's chief executive, said that Marfrig does not see other major food companies like Sadia and Perdigao as competitors as Marfrig is more diversified and has a different strategy from both. 
 

Molina also said that Marfrig also sets itself apart from local meatpacking giant JBS in that the company is also looking at selling processed foods.