Marfrig Alimentos SA (MRFG3), Brazil’s second-biggest food company, is attracting the interest of Blackstone Group LP (BX:US) and Tyson Foods Inc. (TSN:US) for a plan to sell a stake, three people with direct knowledge of the talks said. Shares surged.
Private equity units of JPMorgan Chase & Co. (JPM:US) and Banco Bradesco SA (BBDC4) are also interested in buying a shareholding in Marfrig or one of its units, the people said, asking not to be named because discussions are private. Marfrig hired Banco Itau BBA SA to raise 2 billion reais ($990 million) through the sales, they said, adding that talks are in a preliminary stage.
Marfrig, which makes TV dinners, chicken nuggets and hot dogs, is seeking to reduce debt after making 20 acquisitions in five years to compete with BRF - Brasil Foods SA. (BRFS3) In April, it concluded the sale of European and U.S. assets to Illinois-based Martin-Brower Co. for $400 million.
Sao Paulo-based Marfrig declined to comment in an e-mailed response to questions. Joao Sampaio, Marfrig’s vice president of institutional affairs, said June 13 that the company was seeking to sell assets, including a stake in its Seara unit, to reduce debt to as low as 2.5 times earnings from 4.5 times.
Peter Rose, a New York-based spokesman for private-equity firm Blackstone, declined to comment. Officials at Itau, Bradesco and JPMorgan’s Gavea Investimentos Ltda., who all asked not to be named because of company policies, also declined to comment. Gary Mickelson, a spokesman at Tyson Foods, the biggest U.S. meat processor, declined to comment.
Marfrig rose 3.2 percent to 10.38 reais at 11:55 a.m. in Sao Paulo, the biggest gain on Brazil’s benchmark Bovespa index, which was little changed. The stock climbed 18 percent this year, raising its market value to 3.48 billion reais as of yesterday.
“Marfrig is a well-managed company with good products; the only thing that is stopping the stock from rising is debt,” Caue Pinheiro, an analyst at brokerage SLW Corretora, said by phone from Sao Paulo. “That’s why a plan to reduce its leverage is welcome.”
Moody’s Investors Service last week lowered Marfrig’s debt ratings from B1 to B2, two levels below investment grade, citing the “recent deterioration in its liquidity, mainly due to the concentration of short-term debt payments in the second and third quarters of 2012.”
Fitch Ratings Ltd. revised its outlook for Marfrig and Sao Paulo-based rivals JBS SA (JBSS3) and Brasil Foods to negative from stable. JBS is the world’s largest beef producer and Brasil Foods is the biggest poultry exporter.
“Marfrig will be challenged to raise prices to fully accommodate its rising costs in the context of a slow economy in Brazil and slower-than-expected recovery in its export markets,” Fitch said in an Aug. 17 statement.
Marfrig spent $2 billion in 2010 to buy Seara from Cargill Inc. and McDonald’s Corp. supplier Keystone Foods, causing debt to quadruple in two years.
Itau BBA is the wholesale arm of Itau Unibanco Holding SA (ITUB4), the biggest Latin American bank by market value. Bradesco is Latin America’s second-largest lender by market value.
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