LatinFinance - July/August 2016 - 39

CORPORATE WITH THE BEST
EX-REGIONAL M&A STRATEGY

BRF

BRF, the world's largest poultry exporter,
is getting bigger. Over the past year, the
Brazilian food processor has bought
businesses in Argentina, Qatar, Thailand
and the UK, and it is not likely to stop
there.
"We're looking at other opportunities
in Latin America and Europe," says
Alexandre Borges, BRF's chief financial
officer.
BRF recently closed the acquisitions of
Argentine cold cut companies Alimentos
Calchaquí Productos and Campo Austral.
Calchaquí and Campo Austral have
combined annual revenues around
$190 million, bumping BRF's revenues
in the Southern Cone up to more than
$750 million. The company now plans to
invest $292 million to grow its business in
Argentina.
It was the latest aggressive move in
international M&A that set BRF apart in
the Corporate with the Best Ex-Regional
M&A Strategy category.
Outside of the region, BRF announced
in April that it would take full control of
Omani frozen food distributor Al Khan
Foodstuff (AKF) for $64 million. The
Brazilian firm had acquired a 40% stake
in AKF for $68.5 million in February 2014.
Company executives also traveled to
Namibia in June to discuss investments in
the African nation.
The AKF deal stands alongside the
$140 million deal to buy the frozen food
division of distribution company Qatar
National Import and Export (QNIE) in
November last year. But the biggest deal
came in Thailand, where BRF spent $360
million to buy Golden Foods Siam (GFS)
from Malaysian private equity fund Navis
Capital in December. BRF also acquired
the UK's Universal Meats for $51 million in
February.
GFS, now called BRF Thailand,
recorded higher-than-expected results in

Source: Reuters

As its home economy
stutters, BRF pursues
growth with a series of
global acquisitions

GROWTH THROUGH ACQUISITIONS: BRF Chairman Abilio Diniz has been pushing for an
international expansion

the first quarter this year, and BRF raised
the ebitda projections for the Thai chicken
processor to $50 million for 2016, chief
executive Pedro Faria told analysts in April.
Faria also said BRF's business in Thailand
would supply products to its factory in Abu
Dhabi, for sale in Saudi Arabia.
As net revenues in Brazil slipped 2.4%
year-on-year in the first quarter, they rose
11.2% in the rest of Latin America. Net

ALEXANDRE BORGES, BRF

"WE'RE LOOKING
AT OTHER
OPPORTUNITIES
IN LATIN AMERICA
AND EUROPE"

operating revenues also climbed 54% in
Europe, 43.8% in Asia and 17.9% in the
Middle East and North Africa. BRF had 8.12
billion reais ($2.51 billion) in net revenues
in the first quarter of the year, up 15.2%
on the same period last year, but posted
a 91.5% drop in net income to 39 million
reais, due to higher costs and higher taxes.
Until now, BRF has paid for its
acquisitions with cash and existing credit
lines.
The company made 2.2 billion reais in
acquisition payments in the first half of the
year but it does not have immediate plans
to raise funds in the capital markets, either
at home or abroad, says Borges. BRF had
8 billion reais in cash at the end of the first
quarter, according its financial statements.
BRF sold 1 billion reais in local
agribusiness receivables certificates,
known as CRAs, at 96.5% of the CDI rate
in May. It has not tapped the cross-border
bond market since May last year, when it
sold a 2.75% €500 million ($553 million)
2022 note to yield 2.822%.
Moody's and Standard & Poor's rate
BRF two notches above the Brazilian
sovereign, while Fitch pegs it three
notches higher.
A BRF bond, rated Baa3/BBB/BBB,
would probably carry a spread some
50 basis points or 100 basis points
lower than a sovereign issue, Borges
estimates. But even with the difference,
a likely coupon around 6% is still too
high, he says. LF

July/August 2016 - L ATINFINA NCE.COM 39
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