By Brazil Stock Guide – Marfrig Global Foods SA (MRFG3) expects to finalize its merger with BRF SA (BRFS3) by the end of September, Chief Financial Officer Tang David said on Friday during an earnings call with analysts, according to a report from Globo Rural. The withdrawal right for shareholders who opposed the deal expires on Sept. 5, and the company aims to secure antitrust clearance before that deadline.
Brazil’s Administrative Council for Economic Defense, or Cade, is scheduled to vote on the transaction at its Aug. 20 meeting. So far, the regulator’s tribunal has issued four votes in favor and one against. “We are confident we will get the final ‘ok’ from Cade,” said Marcos Molina, Marfrig’s chairman and controlling shareholder, adding that the votes so far have been “very technical, very consolidated.”
Once the merger is complete, the combined company — to be called MBRF — will focus on capturing synergies in the first six months and won’t pursue additional mergers or acquisitions during that period, Molina said. The company has identified BRL 800 million ($144 million) in synergies, which Molina described as a “conservative” estimate. He noted that MBRF will start with a net debt-to-EBITDA ratio of 3 times, which would be 2.5 times if its US subsidiary, National Beef, were in a normal profitability cycle.
The merged entity is also considering a US listing, which both companies disclosed when announcing the deal. “A US listing is on the radar and we will be prepared,” Molina said, noting that the move would improve valuation multiples and lower the cost of capital. BRF has about BRL 1 billion in tax credits in Paraná state that could be used to fund capital expenditures without draining cash, according to Molina.
Dividend payouts could reach up to BRL 3 billion for BRF, down from the BRL 3.5 billion initially planned, depending on shareholder withdrawals. Under the merger terms, BRF would distribute BRL 3.5 billion and Marfrig BRL 2.5 billion. Molina also argued that BRF shareholders would benefit from converting their shares into the new company, which he said would have greater capacity to turn EBITDA into cash. If the merger had already been in place this quarter, earnings per share would have been BRL 0.54 versus BRL 0.46 for BRF alone, he said.
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