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Go-Ahead for Brasil Foods-Sadia Merger

by 5m Editor
14 July 2011, at 10:02am

BRAZIL - The Brazilian competition authority, the Administrative Council for Economic Defence (CADE), has given the go-ahead for the merger between Brasil Foods and Sadia.

The merger that the company says will make BRF a global leader in the food sector has been allowed subject to special conditions for trading in Brazil, laid out in a performance agreement - TCD.

The conditions cover the brands and products that can be traded and the territories the companies operate in.

However, the agreement does not cover trading in export markets or in the dairy market and food service markets in Brazil.

The agreement covers the brands Rezende, Wilson, Texas, Tekitos, Patitas, Escolha Saudável, Light Ellegant, Fiesta, Freski, Confiança, Doriana and Delicata.

It also covers operations at 10 processed food plants, two hog slaughtering plants, two poultry slaughtering plants, four animal feed plants, 12 chicken breeder stock farms, and poultry hatcheries as well as eight distribution centres.

It also covers the integrated poultry and hog out-growers, who supply the poultry and 70 per cent of the hogs to the production units.

Under the terms of the merger the Perdigão brand will not be used in Brazil for three years for cooked hams, luncheon meat; pork festive line (frozen seasoned pork loin, smoked pork shoulder, seasoned bone/boneless pork leg, boneless baby tender ham, pork tender); smoked sausage and pork sausage and for four years for salamis.

The brand is also suspended for five years for lasagne; frozen pizzas kibes and meat balls and the Perdigão turkey cold cuts light line.

The BATAVO brands have also been suspended for four years for a number of other products.

The agreement is expected to affect 456,000 tonnes of products that will have to be divested and 246 brands that will be suspended. The Perdigão brand, as well as all the rights associated to it, will remain the property of BRF and will be used normally in various categories of processed foods such as breaded products, hamburgers, bologna sausage, fresh sausages, frozen ready to eat meals (except lasagne), bacon, festive poultry line as well as the entire line of organic products, among others.

The volume subject to the restriction of the TCD represent about one third of the sales of the total Perdigão brand.

In relation to the assets to be sold, BRF has agreed to maintain the quality of its products and supplies to the points of sale until the transition to the new owners is concluded.

With respect to the employees and integrate out-growers on the units that have to be sold, BRF has agreed to adopt all possible measures to minimise the impacts arising from the change in the control of these assets. The agreement also requires those buying the assets to maintain the current level of employment for at least six months.