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SAO PAULO, May 21 (Reuters) – Brazilian beef producer Marfrig Global Foods SA is buying shares in BRF SA, the world’s largest poultry exporter, a person familiar with the matter told Reuters on Friday, two years after failure of merger negotiations.
JPMorgan Chase & Co is advising Marfrig on share acquisitions, the source added, speaking on condition of anonymity to disclose private discussions.
BRF said it had not received any official communication regarding the purchase of its shares by Marfrig.
Marfrig did not immediately respond to a request for comment.
Marfrig’s equity investment underscores the strength of its North American division, where consumer demand has been strong and cattle prices relatively low. This bolstered its share price relative to BRF, whose margins were reduced due to its greater dependence on Brazil.
Nonetheless, their portfolios could be complementary if combined under one corporate roof given that Marfrig focuses on beef and BRFs on poultry and pork. The two companies compete with the larger JBS, which enjoys a diverse production and sales base of processed foods and three types of proteins.
Financial news site Brazil Journal reported that Marfrig had already acquired a 4.9% stake in BRF and was buying additional shares in the Previ pension fund, bringing BRF’s earnings for the week to nearly 30%.
Brazilian meat processors have seen their profits rise in recent years, aided by stronger demand from China, especially from 2018, when a deadly pig disease forced them to slaughter millions of animals. in 2018, making room for imports from BRF and Marfrig.
In recent months, Brazilian meat processors have faced significantly higher costs as cattle prices skyrocket and grain costs hit record highs, threatening to devour profit margins.
The companies had discussed a possible takeover of BRF by Marfrig, but broke off talks in July 2019.
BRF shares accelerated their rally to the news, gaining more than 16% on Friday afternoon in Sao Paulo. Marfrig shares fell about 3%.
Marfrig’s acquisition of a stake in BRF was first reported by the newspaper Valor Econômico. (Reporting by Tatiana Bautzer and Ana Mano; Additional reporting by Carolina Mandl; Editing by Brad Haynes, Will Dunham and David Gregorio)