It's all about power
Sadia offers to buy Perdigao for up to $1.7 billion. This announcement must
have sent shivers down the spines of domestic and international competitors in
the food processing market.
Sadia offers to buy Perdigao for up to $1.7 billion.
This announcement must have sent shivers down the spines of domestic and
international competitors in the food processing market.
powerful Brazilian players, well known for their huge market share in pig and
poultry meat production and processing, have proven to be strong competitors on
the international market. Some years ago they joined forces by setting up an
export company to better serve their international clients. The possible
takeover will create a powerhouse which would rank number three on the world
market. And it was a desire to tap into that world market that initiated the
move, Sadia says, because both companies want to boost sales
The real underlying reason is more complicated and
interesting. A couple of months ago, Perdigao changed its statute to make a
takeover less complicated, which initiated international interest. Rumours
indicate that both Tyson and Smithfield, US companies strong in poultry and
pork, are keen to enter the Brazilian market trough a major takeover. Shares of
both Sadia and Perdigao have dipped recently in response to the AI crisis and
consequently reduced sales. This made both companies easy takeover targets,
especially Perdigao. The acquisition makes Sadia the hunter rather than the
hunted. It will move the company closer to its goal of overtaking its
Although insiders don't expect real problems,
the question remains whether the Brazilian anti-trust agency will approve the
takeover. This is going to be a test for them, since the Sadia/Perdigao
combination will be a dominant player on the domestic market for ready meals,
pizzas, pies, hams and more. Analysts say, however, that the domestic market
will only be marginally affected because the Brazilian supermarkets are strong
enough to prevent monopolisation of the meat market by one party.
takeover will have no effect on the production capacity and expansion plans of
either company, and no major saving are expected from synergy. It is interesting
to hear that producers favour the merger. They see more benefits than risks. We
will have to wait and see whether this is the case.
poultry meat market is tough and will remain so. It creates a climate for strong
companies to take over or eliminate weaker competitors. In some parts of the
world, we have seen trends in this direction for some time already. It seems
that we are entering an era where the big players are also hunted to create
stronger powerhouses. Country borders are not barriers anymore, but, like in
Brazil, company mergers and takeovers often seem to include a form of self
defence against 'foreigners'. In a game that's all about power, it is unclear
how long this will continue.
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