Brazil Foods Limited (BRF) announced on Wednesday that the Saudi Company for Agricultural Investment and Animal Production (Salk) and Brazilian food company Marfrig have pledged to purchase shares in a potential new stock offering valued at up to $900 million. BRF mentioned that the Saudi company offered to buy up to 50% of the shares to be offered, which total 500 million new shares. This step is strategic for Saudi Arabia, as it is a major buyer of Brazilian meat products. The Riyadh government had previously partnered with BRF for a joint venture in halal meat through the Public Investment Fund, which owns Salk.
Marfrig, which currently holds a controlling stake of 33% in Brazil Foods, has also committed to buying the remaining 250 million shares in the offering, according to Brazil Foods. According to the proposed deal's terms, the share price should not exceed nine Brazilian reals, meaning the total offering will amount to 4.5 billion Brazilian reals ($899.41 million). Brazil Foods clarified that its board has already approved the appointment of a financial advisor for the offering.
Analysts at Bradesco BBI stated in a client note, "Saudi Arabia has been the largest importer of chicken from BRF in recent years," adding that the proposed deal could also "allay investors' concerns that recent cases of bird flu in Brazil (which have only been detected in wild birds so far) may someday lead to export restrictions." Salk was established in 2011 to secure food supplies for the Kingdom through massive production and foreign investments. Salk already holds a 31% stake in Minerva, a Brazilian meat-exporting company.
