Brazil's JBS SA will acquire the poultry and pork unit of rival Marfrig Alimentos SA for 5.85 billion reais ($2.75 billion) in assumed debt, further extending its reach beyond its core beef business. The deal, which the companies disclosed in a securities filing on Monday, is likely to help alleviate worries about Marfrig's high level of debt, one reason the company's shares have fallen 12 percent this year.
The transaction will give JBS, the world's largest meatpacker, Marfrig's Seara-branded Brazilian poultry, pork and processed foods business, along with a Uruguay-based leather operation. With Seara, JBS will increase its share of Brazil's poultry and pork market, which BRF SA dominates. The deal will also help Marfrig cut the $6.1 billion debt load that it racked up after a series of recent takeovers of smaller rivals.
The deal will also allow Marfrig to focus on its beef operation in Brazil, the filing said, while JBS will become the second-largest processed meat producer in the country. Marfrig, Brazil's No 2 poultry and pork producer, will become a significantly smaller company. In the first quarter, the Seara Brasil unit's sales rose 48 percent to 2.05 billion reais, accounting for 30 percent of Marfrig total revenue.
Sergio Rial, president of Seara Brasil, said at a Sao Paulo news conference on Monday that the sale "practically" eliminated Marfrig's bank debt. He is slated to become chief executive officer of Marfrig in 2014. 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.
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