Brazilian meat processing company Minerva Foods is set to acquire cattle slaughtering and deboning plants across South America from Marfrig, one of the region’s leading meat processing companies. The deal, valued at BRL 7.5 billion (USD 1.54 billion), is subject to antitrust approval. If cleared, it will increase Minerva’s revenue by 45 percent.
With this acquisition, Minerva will become the second-largest beef processor in Brazil, behind JBS. The deal comes at a time when Minerva is outperforming rivals, including Marfrig and JBS, which have been hit by a series of setbacks, including rising feed costs and a market oversupply of chicken and pork.
The assets to be acquired operate in Brazil, Argentina, Chile, Uruguay, Colombia, and Paraguay, and include four meat-processing plants in Australia. In a statement, Minerva said the deal represents a “leap forward” for the company. It will increase Minerva’s beef processing capacity by 44 percent, from 29,540 heads per day to 42,439.
“This will place our company in a new tier, giving us access to new international customers, maximizing commercial opportunities and operational synergies, reducing risks, and increasing our ability to compete in the international animal protein market,” said Minerva CEO Fernando Queiroz.
Goldman Sachs sees strategic merit in the deal that will consolidate Minerva as one of the world’s largest beef producers, with a 4.4 percent global market share. However, the bank registered surprise at the magnitude of the M&A transaction.
The main risks in Goldman Sachs’ investment thesis include: new export embargoes, bans, or sanitary disruptions; potential slowdown in Chinese demand; other M&A activity; currency volatility; ongoing political and macroeconomic volatility in Argentina, and increasing competition for beef exports. Goldman Sachs has a buy rating on Minerva shares, with a 12-month price target of BRL 15.80.
According to research firm Eleven, the deal gives Minerva even greater bargaining power with suppliers, reinforces its Latin America leadership position, and increases the company’s exposure to premium markets. An Eleven spokesperson said: “In addition to margin expansion, we also expect synergies from the unification of sales, general, and administrative costs of the acquired operations, which should lead to greater profitability.”
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