Mafrig Foods, a Brazilian meat packer, announced Tuesday that it had concluded an agreement that allows it to purchase Keystone Foods, a US distributor, for $1.26 billion. Keystone Foods serves over 28,000 restaurants in thirteen countries across the globe and boasts pioneering the development of boneless chicken nugget. In 2009, the company had net revenue of $6.4 billion from its food and distribution business.
In a statement, Mafrig confirmed that it would buy 100% of the US distributor’s shares, reiterating that the new acquisition would raise Mafrig to a great level as a global supplier to the global chains of companies such as McDonalds, Campbell’s, Subway, ConAgra, Yum Brands and Chipotle, the statement said. The company hopes that the addition of Keystone’s resources and its management will enable Mafrig enlarge its operations, with the aim being to meet the existing opportunities for expansion and development in the global food market.
With the acquisition of Keystone, Mafrig becomes the latest Brazilian food company to seek growth outside the country, backed by a robust domestic customer demand and an economy that is rated as one of the fastest growing in the developing world.
In 2009, JBS, a Brazilian food company, successfully purchased a 64% stake in the bankrupt Pilgrim’s Pride, another US chicken producer, at an estimated $800 million worth of investment. However, Mafrig’s investment funding for the acquisition of Keystone Foods will come from the issue of a private subscription of debentures worth $2.5 billion reals, about $1.38 billion, mandatorily convertible into shares in a five year term. According to the company, the acquisition of the US distributor will be done in the second half of this year, which includes the planned funding for the investment.
Keystone Foods Chief Executive, Jerry Dean, issued a statement saying that the takeover by Mafrig would benefit the two companies’ consumers and workforce globally. Mafrig chairman and president, Marcos Molina, reiterated that the global food market is growing and Brazil has taken advantage of this growth by strategically consolidating within the protein industry. The addition of the US distributor would thus expand the company’s business considerably to enable it meet global demand and growth opportunities within the industry.
To finance the acquisition, the Brazilian meat giant said it would issue BRL$2.5bn (US$1.3bn) in shares through a private subscription of five-year mandatory convertible debentures, with a proposed strike price of R$21.50 per share. The debentures will also receive the annual interest, equivalent to CDI+1%, before the conversion.
June 17, 2010.