BRF, the world’s largest poultry exporter, is getting bigger. Over the past year, the Brazilian food processor has bought businesses in Argentina, Qatar, Thailand and the UK, and it is not likely to stop there.

“We’re looking at other opportunities in Latin America and Europe,” says Alexandre Borges, BRF’s chief financial officer.

BRF recently closed the acquisitions of Argentine cold cut companies Alimentos Calchaquí Productos and Campo Austral. Calchaquí and Campo Austral have combined annual revenues around $190 million, bumping BRF’s revenues in the Southern Cone up to more than $750 million. The company now plans to invest $292 million to grow its business in Argentina.

It was the latest aggressive move in international M&A that set BRF apart in the Corporate with the Best Ex-Regional M&A Strategy category.

Outside of the region, BRF announced in April that it would take full control of Omani frozen food distributor Al Khan Foodstuff (AKF) for $64 million. The Brazilian firm had acquired a 40% stake in AKF for $68.5 million in February 2014. Company executives also traveled to Namibia in June to discuss investments in the African nation.

The AKF deal stands alongside the $140 million deal to buy the frozen food division of distribution company Qatar National Import and Export (QNIE) in November last year. But the biggest deal came in Thailand, where BRF spent $360 million to buy Golden Foods Siam (GFS) from Malaysian private equity fund Navis Capital in December. BRF also acquired the UK’s Universal Meats for $51 million in February.

GFS, now called BRF Thailand, recorded higher-than-expected results in the first quarter this year, and BRF raised the ebitda projections for the Thai chicken processor to $50 million for 2016, chief executive Pedro Faria told analysts in April. Faria also said BRF’s business in Thailand would supply products to its factory in Abu Dhabi, for sale in Saudi Arabia.

As net revenues in Brazil slipped 2.4% year-on-year in the first quarter, they rose 11.2% in the rest of Latin America. Net operating revenues also climbed 54% in Europe, 43.8% in Asia and 17.9% in the Middle East and North Africa. BRF had 8.12 billion reais ($2.51 billion) in net revenues in the first quarter of the year, up 15.2% on the same period last year, but posted a 91.5% drop in net income to 39 million reais, due to higher costs and higher taxes.

Until now, BRF has paid for its acquisitions with cash and existing credit lines. 

The company made 2.2 billion reais in acquisition payments in the first half of the year but it does not have immediate plans to raise funds in the capital markets, either at home or abroad, says Borges. BRF had 8 billion reais in cash at the end of the first quarter, according its financial statements.

BRF sold 1 billion reais in local agribusiness receivables certificates, known as CRAs, at 96.5% of the CDI rate in May. It has not tapped the cross-border bond market since May last year, when it sold a 2.75% €500 million ($553 million) 2022 note to yield 2.822%.

Moody’s and Standard & Poor’s rate BRF two notches above the Brazilian sovereign, while Fitch pegs it three notches higher.
A BRF bond, rated Baa3/BBB/BBB, would probably carry a spread some 50 basis points or 100 basis points lower than a sovereign issue, Borges estimates. But even with the difference, a likely coupon around 6% is still too high, he says. LF