August 28, 2012

Marfrig to reduce debt through sales of stake
 

Beef producer, Marfrig, may sell a stake in order to cut down rising debts.

The move is expected attract food companies as well as private equity firms.

Marfrig has appointed Brazilian bank Banco Itaú to hold the bidding process and expects to raise about US$989 million through the sale of its stake in the holding company or some of its divisions.

While the talks are at a preliminary stage, potential bidders could include US food company, Tyson Foods, US private equity firm, Blackstone, private equity units of American multinational banking company, JPMorgan, and Brazilian banking company, Banco Bradesco.

Marfrig Alimentos is seeking to lower its debt of US$4.29 billion, after making about 20 acquisitions over a five-year period, in order compete with its rival BRF - Brasil Foods.

In a major acquisition, the company invested US$2 billion to acquire Brazilian poultry and pork business Seara from Cargill and Keystone Foods in 2010, which caused its debt to increase fourfold within two years.

To lower its debt, Marfrig completed the divestment of US and European distribution unit to US distributor, Martin-Brower, for US$400 million in February 2012.

In June 13 2012, Marfrig vice president of institutional affairs, Joao Sampaio, noted that the company was planning to divest its assets as well as its stake in Seara to lower its debt from the current 4.5 times the earnings to 2.5 times.