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MarketScreener Homepage  >  Equities  >  Bolsa de Valores de Sao Paulo  >  Marfrig Global Foods    MRFG3   BRMRFGACNOR0

MARFRIG GLOBAL FOODS

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Brazil's JBS expands poultry push with $2.75 billion Marfrig deal

06/10/2013 | 11:51am EST

SAO PAULO (Reuters) - Brazil's JBS SA will acquire Marfrig Alimentos SA's local poultry and pork unit for $2.75 billion (1.76 billion pounds) in assumed debt, further extending its reach beyond its core beef business in a deal that throws a lifeline to its financially strapped rival.

The takeover of Marfrig's (>> Marfrig Alimentos SA) Seara-branded Brazilian processed foods business should vault JBS (>> JBS SA), already the world's largest beef producer, to the global top spot in poultry as well, Chief Executive Officer Wesley Batista said on Monday at a news conference in Sao Paulo.

The deal, which also gives JBS a Uruguay-based leather operation, follows a period of aggressive consolidation in Brazil's meat industry. State development bank BNDES <BNDES.UL> has been providing cheap credit to buyers in a government effort to create "national champions" that can compete on a global scale.

While both JBS and Marfrig borrowed heavily to finance a string of acquisitions, the latter has faced more difficulty in reducing its debt load, which currently stands at $6.1 billion.

"The deal puts the company in its best debt position in recent years," Sergio Rial, president of Seara Brasil, said at the same news conference.

Rial, who is slated to become CEO of Marfrig in 2014, said the sale would help the company cut its debt load by about 60 percent and "practically eliminate" its bank debt.

Marfrig shares, which had fallen about 12 percent this year on concerns over its debt, were up 9.3 percent at 8.14 reais, while JBS fell 7 percent to 6.63 reais.

"The reduction of Marfrig's debt is positive, but JBS on the other hand became more indebted," said Luis Gustavo Pereira, a strategist with Futura Corretora, a Sao Paulo brokerage. But JBS is not at "critical" levels of indebtedness the way Marfrig was, he added.

Moody's Investors Service put Marfrig on review for a possible credit rating downgrade last month. "The possibility of a covenant breach in its nonconvertible debentures in the 2Q13 is high in the absence of asset sales," the ratings agency said.

FROM BEEF TO CHICKEN

JBS's first foray into Brazil's poultry market was in May 2012, when it leased assets owned by Frangosul, the local unit of French poultry company Doux. The Frangosul transaction, though, was primarily aimed at the export market.

JBS also has poultry operations in the United States through its Pilgrim's Pride brand (>> Pilgrim's Pride Corporation), which it bought in 2009 for $800 million.

The Seara acquisition, valued at 5.85 billion reais, will give JBS an estimated 10 billion reais of additional annual revenue and boost its poultry production capacity to 12 million animals a day, according to Batista, the company's CEO. JBS had 75 billion reais in total revenue in 2012.

"This turns us into the No. 2 processed foods company in Brazil and is going to make us a global leader in poultry," Batista said at the news conference, adding that JBS is not considering other major acquisitions at the moment.

Despite the acquisition, JBS will still trail rival BRF SA (>> BRF SA) in the local market for processed foods.

The sale of Seara Brasil does not include overseas assets such as the Keystone and Moy Park brands held by Seara Foods, the Marfrig unit that controls Seara Brasil.

Marfrig will become a significantly smaller company after the deal. In the first quarter, the Seara Brasil unit's sales rose 48 percent to 2.05 billion reais, accounting for 30 percent of Marfrig's total revenue.

Reuters reported on Saturday that the two companies were about to announce the sale of Seara to JBS. On Sunday Reuters reported the deal would be worth between $2.5 billion and $3 billion.

Rial, the Seara executive, said he expected to receive regulatory approval from Brazil's antitrust agency, Cade, in 30 to 60 days.

In April, Cade approved JBS's purchase of Brazil's Bertin and 11 smaller meatpackers, but said it would monitor JBS's position in the Brazilian beef market.

Since Seara's main products are poultry and pork, however, JBS's takeover of the company may not raise the same concerns.

Rial said Marfrig was not looking to sell additional assets for now.

(Additional reporting by Roberta Vilas Boas; Writing and additional reporting by Asher Levine; Editing by Todd Benson and Lisa Von Ahn)

By Fabiola Gomes


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
BEST INC. 5.37% 2.16 Delayed Quote.0.49%
BRF S.A. 0.00% 20.41 End-of-day quote.-7.40%
EURO / BRAZILIAN REAL (EUR/BRL) -0.01% 6.415 Delayed Quote.2.52%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 -0.28% 134.925 End-of-day quote.-3.27%
JBS SA 1.14% 24.75 End-of-day quote.4.83%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 0.04% 113.4 End-of-day quote.0.33%
MARFRIG GLOBAL FOODS -1.02% 13.53 End-of-day quote.-6.75%
PILGRIM'S PRIDE CORPORATION 3.61% 20.07 Delayed Quote.-1.22%
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Financials
Sales 2020 65 803 M 12 436 M 12 436 M
Net income 2020 2 335 M 441 M 441 M
Net Debt 2020 16 438 M 3 107 M 3 107 M
P/E ratio 2020 3,79x
Yield 2020 0,92%
Capitalization 9 454 M 1 782 M 1 787 M
EV / Sales 2020 0,39x
EV / Sales 2021 0,37x
Nbr of Employees 32 222
Free-Float 51,3%
Chart MARFRIG GLOBAL FOODS
Duration : Period :
Marfrig Global Foods Technical Analysis Chart | MRFG3 | BRMRFGACNOR0 | MarketScreener
Technical analysis trends MARFRIG GLOBAL FOODS
Short TermMid-TermLong Term
TrendsBearishBearishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 12
Average target price 18,50 BRL
Last Close Price 13,53 BRL
Spread / Highest target 62,6%
Spread / Average Target 36,7%
Spread / Lowest Target -3,92%
EPS Revisions
Managers and Directors
NameTitle
Miguel de Souza Gularte Chief Executive Officer
Marcos Antonio Molina dos Santos Chairman
David Tang Chief Financial & Administrative Officer
Alain Emilie Henry Martinet Director
Márcia Aparecida Pascoal Marçal dos Santos Director
Sector and Competitors
1st jan.Capitalization (M$)
MARFRIG GLOBAL FOODS-6.75%1 783
HENAN SHUANGHUI INVESTMENT & DEVELOPMENT CO.,LTD.3.07%26 185
HORMEL FOODS CORPORATION-3.99%24 161
TYSON FOODS, INC.-0.84%23 311
WH GROUP LIMITED4.77%13 160
JBS SA3.64%12 018