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SAO PAULO, May 21 (Reuters) – Brazilian beef producer Marfrig Global Foods SA is buying shares in BRF SA , the world’s largest poultry exporter, a person with knowledge of the matter told Reuters on Friday, two years after failed merger talks.
JPMorgan Chase & Co is advising Marfrig on the share acquisitions, the source added, speaking on condition of anonymity to disclose private discussions.
BRF said it has not received any official communication regarding Marfrig buying its shares.
Marfrig did not immediately respond to a request for comment.
Marfrig’s stakebuilding underlines the strength in its North American division, where consumer demand has been strong and cattle prices relatively low. This has bolstered its stock price relative to BRF, whose margins have been squeezed by its greater reliance on Brazil.
Still, their portfolios could be complementary if combined under one corporate roof given Marfrig’s focus on beef and BRF’s on poultry and pork. Both companies compete with larger JBS, which boasts a diversified production base and sales of processed foods and three protein types.
Financial news website Brazil Journal reported that Marfrig had already acquired a 4.9% stake in BRF and was buying additional shares from pension fund Previ, lifting BRF’s gains for the week to nearly 30%.
Brazilian meatpackers have seen profits surge in recent years, helped by strengthening demand from China, especially starting in 2018, when a deadly pig disease forced it to cull millions of animals in 2018, making room from imports from the likes of BRF and Marfrig.
In recent months, Brazilian meatpackers have faced sharply higher costs as cattle prices soared and grain costs hit record highs, threatening to devour profit margins.
The companies had discussed a potential takeover of BRF by Marfrig, but broke off talks in July 2019.
BRF shares accelerated their rise on the news, gaining more than 16% on Friday afternoon in Sao Paulo. Marfrig shares fell about 3%.
Marfrig’s stake-building in BRF was first reported by newspaper Valor Economico. (Reporting by Tatiana Bautzer and Ana Mano; Additional reporting by Carolina Mandl; Editing by Brad Haynes, Will Dunham and David Gregorio)
