Brasil Foods, Brazil’s biggest maker of TV dinners and frozen meat products, won conditional approval of its 3.8 billion US dollars takeover of rival Sadia SA as Brazilian regulators ordered it to stop using a top brand and sell some assets to ensure domestic competition.
The acquisition was approved in a 4-1 vote by Brazil’s antitrust regulator, known as Cade, in a meeting in Brasilia Wednesday. The approval is contingent on Brasil Foods suspending its 1.96 billion USD Perdigao brand, as well as other restrictions, Cade said.
Chief Executive Officer Jose Antonio Fay and other executives have been working to negotiate a deal with regulators in recent weeks after a commissioner said June 8 Cade should block and undo the 1 1/2-year-old takeover. The combined company would have too much market share and may hurt consumers, Carlos Ragazzo, a member of the antitrust regulator, said at the time. Ragazzo was the only commissioner to vote against the deal in Wednesday’s session.
As part of the accord, Brasil Foods will suspend the use of top brand Perdigao on some products for three to five years as well as the Batavo brand on all meat products for four years. The deal also includes selling 10 food-processing plants, eight distribution centres and 13 brands, including Doriana, Delicata, Rezende and Wilson, Cade Commissioner Ricardo Ruiz said at the meeting in Brasilia.
Trading of the company’s shares in Sao Paulo and New York was temporarily suspended Wednesday ahead of the Cade vote.
Brasil Foods, formerly known as Perdigao, currently controls 69% of the market for processed frozen meat in Brazil, which includes TV dinners, hamburgers and meatballs, according to its 2010 annual report. The meatpacker was created after Perdigao SA purchased Sadia in a 3.8 billion deal supported by state-company pension funds and Brazil’s development bank, BNDES, after the bigger rival booked more than 3 billion Real in wrong-way currency bets.
The company has 41 distribution centres and 60 plants in Brazil, one in Argentina and two in Europe. The maker of Batavo yogurts and Miss Daisy frozen desserts reported sales of 22.7 billion Real (14.4 billion USD) last year.
The Perdigao brand is Brazil’s ninth most-valuable brand held by a publicly traded company, ahead of iron-ore miner Vale SA, according to a joint study made by Sao Paulo-based research firm BrandAnalytics and Dublin-based WPP Plc, the world’s largest advertising company. Perdigao is valued at 1.96 billion USD and the Sadia brand is valued at 1.97 billion USD, the report found.
Brasil Foods is controlled by Previ and Petros, the pension funds for employees of Banco do Brasil SA and state-run oil producer Petroleo Brasileiro SA. Brazil’s development bank, known as BNDES, also has a stake.