Brazil's BRF, Marfrig In Talks To Form Meatpacking Heavyweight

By Steve Wynne-Jones
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Brazil's BRF, Marfrig In Talks To Form Meatpacking Heavyweight

Brazilian food processors BRF SA and Marfrig Global Foods SA on Thursday announced exclusive talks for a potential tie-up that would create one of the world's largest meat producers, according to securities filings.

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 cap was 27.8 billion reais ($7 billion) at Thursday's market close.

Two people with knowledge of the talks said they are expected to reach an all-share deal, with no cash payments.

Protein Portfolio

Two other sources close to the companies said their aim is to create a complete protein portfolio to compete with global giants such as Tyson Foods Inc and JBS.

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 roughly 85% in a combined company, with the rest held by Marfrig shareholders.


BRF and Marfrig were attracted by their complementary geography too, according to the sources, who requested anonymity to discuss the confidential talks. BRF has a strong presence in the Brazilian market and exports mainly fresh poultry. Marfrig has a stronger U.S. presence after acquiring National Beef last year.

Another person close to the companies 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 China's WH Group Ltd.

Banking Support

Banks have not yet been formally hired, but BRF is expected to hire Citigroup Inc and Marfrig is seen hiring JPMorgan Chase & Co, according to two of the sources. Citi and JPMorgan did not immediately respond to requests for comment.


A deal could help with BRF's heavy debt load and struggle to regain an investment-grade credit rating. BRF's debt is 5.6 times its earnings before interest, tax, depreciation and amortization (EBITDA).

A combined company with Marfrig will have a 3.1 ratio, one of the people said.

BRF shares have fallen in each of the past four calendar years and are down nearly 60% from their 2015 peak, as a mega-merger in 2009 failed to yield promised results and a private equity-led shakeup led to three consecutive annual losses.

Marfrig shares are broadly flat over the same period, while shares of rival JBS have nearly doubled so far this year.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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