BRF studies possible merger with Marfrig

BRF signed a memorandum of understanding with Marfrig on Thursday (May 30) for the two companies to evaluate the possibility of combining their businesses. If successful, the merger will result in a company that will be among the industry leaders in Brazil, the United States, Latin America, the Middle East, and Asia.

BRF and Marfrig will have 90 days, which can be extended by another 30 days, to carry out deeper studies and define the terms of a final agreement.

The company resulting from the merger should have a higher level of corporate governance and will adopt policies that seek Investment Grade Rating.

The preliminary terms of the transaction do not consider any cash disbursement, being based on an exchange of shares that will result in the attribution of 84.98% of the resulting shareholding to BRF shareholders and 15.02% to Marfrig shareholders.

NewCo implied financials and comparison with peers

The understanding is that the merger represents complementarity for the two companies in their business segments, geographic and protein diversification, and risk reduction. According to Reuters, the goal is to create a complete protein portfolio to compete with global giants such as Tyson Foods and JBS.

According to estimates by investment bank BTG-Pactual, the merger will result in a new global meat giant, with revenues of almost R$80bn, of which 1/3 corresponds to the US beef segment, 1/3 corresponds to Brazil’s beef and pork market and the remaining 1/3 to BRF’s international arm in the Middle East and Asia.

If the merger goes ahead, it will reinforce the companies’ commitments to cost reduction, the improvement of capital structure, the focus on Brazil and the Halal Market (products certified according to Muslim procedures), innovation, the expansion of product range in Brazil and in other international markets, and reinforce the stability of the management model.

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