Shares take a tumble as investors beef about Minerva’s acquisition
SAO PAULO, Aug 29 (Reuters) – Shares in South America’s largest beef exporter fell sharply on Tuesday as investors digested Minerva’s BEEF3.SA move to acquire 16 slaughterhouses from rival meatpacker Marfrig MRFG3.SA for 7.5 billion reais ($1.53 billion).
Minerva shares fell 15% in morning trading while Marfrig jumped 9%.
Analysts warned that the move, making Minerva one of the world’s biggest beef sellers, could strain its debt levels and weigh on expected dividends.
“We are surprised with the magnitude of this M&A. We believe part of (Minerva’s) investment thesis is supported by its (dividend) payout, and we expect a negative share reaction to the news,” Goldman Sachs analysts said in a note to clients, while noting the “strategic merit” of the deal.
With the sale, announced on Monday, Marfrig, which also controls U.S.-based National Beef and poultry giant BRF SA BRFS3.SA in Brazil, would keep only its biggest industrial facilities in South America to focus on processed products of higher added value.
The move marks a shift away from a commoditized business model for Marfrig, which has diversified among proteins and focused on high-profile brands, while competitor Minerva doubles down on processing beef with economies of scale.
XP analysts estimated Minerva’s cattle slaughtering capacity would rise by 43% as a result of the deal, making it Brazil’s second-biggest beef processor by slaughtering capacity, behind JBS.
By Ana Mano and Gabriel Araujo | Reuters
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