Meat&Poultry - August 2011 - 14

Success is a Matter of System

Business Notes
AgFeed to buy Pine Ridge Farms, Kansas City Sausage Co.
AgFeed Industries Inc., an international agribusiness with operations in the US and China, has entered into separate non-binding letters of intent to acquire Pine Ridge Farms LLC (PRF) and Kansas City Sausage Company LLC (KCS). Combined, both businesses are expected to add more than $180 million of annualized revenue and more than $13 million of EBITDA to AgFeed’s results. These acquisitions mark AgFeed’s entry into the harvest and processing segment of the pork business. They will provide the base of human resources necessary to expand this business and develop this segment of the company’s business as an adjunct to the western-style hog farms under development in China, according to AgFeed. Des Moines, Iowa-based PRF is a leading specialty hog processing facility established in January 2004. It has processing capacity of more than 3,000 animals per day. PRF manufactures pre-rigor for sausage, fresh and frozen pork products, and private-label products. PRF said it has initiated a series of innovative projects and initiatives including processing pork hides, custom ham boning operations and butcher pork processing for a major pork production company to minimize the earnings volatility common to commodity businesses. Kansas City, Mo.-based KCS began operations in 2009 and is arguably one of the newest and most efficient and well-designed sausage facilities in the US, AgFeed claims. KCS is a private-label sausage company. With customers including major retailers and foodservice companies, KCS sells products domestically and also exports products to customers in Canada, Mexico, the Caribbean and the Pacific Rim.■

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Brasil Foods forced to sell assets, brands
On July 13, Brazilian antitrust regulators gave their support to a deal that saves the merger that created Brasil Foods. According to Reuters, the Administrative Council for Economic Defense (CADE), an antitrust watchdog, endorsed a plan that stipulates Brasil Foods SA will sell 80 percent of flagship brand Perdigao’s production capacity and will stop selling some of its products for between three and five years. This agreement prevents a forced breakup of Brasil Foods, the Sáo Paulo-based processed foods company which was formed from the 2009 takeover of Sadia by smaller rival Perdigao. Citing Brasil Foods’ dominance in several markets, CADE had threatened to derail the merger. Following CADE’s decision, the company’s shares posted their biggest gain in more than two years. The outcome is seen as a major victory for Brasil Foods, whose brands rule supermarket shelves throughout Brazil. Breaking up the company would have cost much more than unloading some assets and brands. Because the restrictions will hardly weigh on the company’s pricing power, consumer groups and antitrust lawyers said CADE’s approval of the merger is a blow to corporate governance standards in Brazil – Latin America’s largest economy. Marfrig Alimentos SA, a leading Brazilian beef processor, has shown interest in the assets Brasil Foods might sell, a source told Reuters. Other candidates include JBS SA, the world’s largest beef processor, which has been considering expanding into poultry and pork, and smaller competitor Minerva SA. ■

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Meat&Poultry - August 2011

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