Brazil Foods Asset Swap Seen as Positive for Marfrig

Brazilian food companies Brazil Foods (BRF) and Marfrig have agreed to an asset swap that would satisfy BRF’s regulator-mandated asset divestments and add Argentine assets to its portfolio, a trade that offers an Ebitda boost to Marfrig. As part of the deal, Marfrig would pay BRL200m ($110m) to BRF and hand over the assets and brands for Argentina’s Paty hamburger, the Barny and Estancia del Sur brands, as well as a number of barns and farmland in Mato Grosso. Marfrig in turn would get a series of assets, including brands such as Wilson, Texas, Tekitos, Patitas, Light Elegante and Doriana margarine, 10 food processing plants and 12 chicken barns, eight distribution centers and 64.57% in Excelcior Alimentos. Officials at Marfrig declined to provide more information on the transaction, or to disclose if any advisors were used. BRF officials could not immediately be reached for comment. As announced, the deal was seen as a good move for Marfrig. “At first glance, the deal seems slightly more favorable to Marfrig,” said Barclays Capital in a research note. Barclays reckons Marfrig is adding an additional 13% to its Ebitda, while BRF is adding 3% to its Ebitda numbers. For BRF, the deal will mean surrendering roughly $100m in Ebitda in exchange for $120m in cash and $50m in Ebitda as well as a pork plant in Brazil, leaving its net leverage at 1.25x, according to Barclays estimates. Marfrig is left with a leverage of 5.5x net debt to Ebitda, the bank estimates. Since the creation of BRF through the merger of Sadia and Perdigao in 2009, Brazilian anti-trust regulators have pressed the company to divest some assets, including brands Batavo and Doriana.