MercoPress. South Atlantic News Agency

Brazilian meats’ corporation set to become main supplier of McDonald’s

Keystone distributes poultry and beef to 30.000 restaurants worldwide

Marfrig Alimentos SA, Latin America’s second-largest beef producer, agreed to buy meat processor US based Keystone Foods LLC for 1.26 billion US dollars to become a supplier to restaurant chains such as McDonald’s Corp.

Marfrig, based in Sao Paulo, Brazil will sell 2.5 billion Real ($1.4 billion) of five-year bonds convertible into stock to finance the acquisition of Keystone from private equity firm Lindsay Goldberg LCC, according to a regulatory filing published this week. Marfrig, in a separate filing Tuesday said it plans to issue American depositary receipts.

The purchase will make Marfrig a supplier of chicken nuggets, hamburgers and other meat products to McDonald’s, sandwich-shop chain Subway Restaurants and Campbell Soup Co. in 13 countries including the US, France and Australia.

The Brazilian meatpacker has expanded production through 38 acquisitions in the past three years, including the takeover of Cargill Inc.’s poultry and pork business in Brazil for 705.2 million US dollars.

Net sales may almost triple at Marfrig this year to 27.8 billion Real after the acquisition, from 9.6 billion Real in 2009.

The bonds that Marfrig plans to sell in Brazil’s domestic market this year will mandatorily be converted into shares after five years. They’ll be converted at 21.50 Real per share.

Brazil's state development bank BNDES is seen as the most likely candidate to buy the Marfrig notes, International Financing Review said on Tuesday, citing market sources with knowledge of the deal. The company's board will meet on June 30 to approve the debt issuance. BNDES is seen as the only lender capable of absorbing such an issuance in a private placement, financiers consulted by the publication said.

Keystone, based in West Conshohocken, Pennsylvania, produces more than 1.6 billion pounds of poultry products and 388 million pounds of beef products a year and distributes them to about 30,000 restaurants worldwide, according to its website. It reported net sales of 6.4 billion USD in 2009.

“The joining of these two global companies will benefit our clients and employees globally” Keystone Foods Chief Executive Officer Jerry Dean said in the statement.

Lindsay Goldberg LLC, based in New York, is a private equity firm founded by Alan Goldberg and Robert Lindsay, respectively a former private equity chief and former managing director at Morgan Stanley.

Marfrig is the latest Brazilian food company to expand abroad, tapping growing demand for protein in China and India, the world's most populous countries. Brazilian companies are also stepping up takeovers in the United States, where company valuations remain low after the deepest economic recession since the 1930s.

Brazil's JBS SA, the world's biggest meat processor, bought a 64% stake in bankrupt US chicken producer Pilgrim's Pride Corp for 800 million US dollars last year.