BRF Brasil Foods to absorb Sadia

Brazilian food company BRF Brasil Foods has announced that it will absorb its wholly-owned poultry meat subsidiary Sadia by the end of this year to streamline company processes.

BRF said the main purpose of the merger is to accomplish the full integration of the BRF and Sadia businesses; maximise synergies and rationalise activities, reduce administrative and operating costs, and increase productivity.

The move is seen as a part of its efforts to streamline processes, which started following the business combination of Sadia and Perdigao that led to the formation of BRF Brasil Foods in 2009.

The integration of Sadia into BRF is expected to result in losses of about BRL$215m ($125m) in the fiscal year of 2011, related to a valuation allowance for deferred income tax and social contribution over tax losses and negative base of social contribution on net income, which will not be utilised after the merger

With the move, Sadia will cease to operate and its shares will be cancelled.

In July 2011, Brazilian antitrust regulator Cade approved the merger of Sadia and Perdigao to form BRF Brasil Foods but ordered the company to divest some portion of its assets to ensure domestic competition.

Following the regulation, BRF signed an agreement in December 2011 to swap assets with beef producer Marfrig Alimentos.

Under the agreement, Marfrig will gain ownership of assets worth BRL$1.4bn ($775m), which include 12 brands, eight distribution centres, four pig and chicken slaughterhouses, and ten food-processing plants.

In exchange, Brasil Foods will gain control over Marfrig’s commercial operations in Uruguay and Chile, Argentine assets, a feedlot in Brazil’s Mato Grosso state, and receive a payment of BRL$200m ($112m) from Marfrig.

BRF manufactures frozen chickens, frozen pork cuts and beef cuts, processed food products, milk, soy meal and refined soy flour.

For the third quarter of 2011, BRF reported that its net income increased 73% to BRL$365m ($215.7m), compared to the same period the previous year.