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News 825 views update:Jan 20, 2010

Brazil: Sadia and Perdigão may merge

Brazil's meat-processing giant Sadia SA once made a hostile bid for rival Perdigão SA. Now, however, Sadia is looking for a partner from a position of weakness instead of strength, reports The Wall Street Journal.

The two companies, which together slaughter more than 2 bln chickens and other birds a year, said they are in discussions for a merger that would rescue Sadia and create one of the world's largest frozen and processed food companies.

Sadia was crippled in 2008 by a bln-dollar. For Perdigão, Sadia's stumble is a chance for it to take over its main competitor on Brazilian store shelves.

Brazil's government's development bank could help finance a merger with as much as $750 mln, Citibank analyst Carlos Albano estimated in a report.

A tie-up of Perdigão and Sadia, with about $11 bln in combined annual sales, would rank as the 10th-largest food company in the Americas, it is reported.

Such mergers could intensify the rivalry with US firms such as Tyson Foods Inc., which last September announced an aggressive move into Brazil, buying 3 poultry firms. With low wages and costs, Brazil is attractive for food producers, and already exports more chicken than any country.

Source: The Wall Street Journal

Natalie Berkhout

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