Brazilian meat packers Marfrig and BRF have entered into exclusive merger talks, the companies have announced.

If the talks are successful, the merged entity will create one of the world’s largest meat businesses.

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The companies made the announcement in separate securities filings.

In its filing, BRF said “it is expected that a business combination between the company and Marfrig would raise the combined company to a leadership position in the markets in which it will operate”.

BRF said the merger would also reduce the enlarged entity’s “exposure to sector risks and generate synergies due to the balance and complementarity of products, services and geographic diversification, with a material presence in Brazil, the United States, Latin America, the Middle East, and Asia”.

BRF added a successful deal would also shore up its finances by reinforcing “its commitment to the reduction of [the] company’s financial leverage and the adjustment of its capital structure”.

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For its part, Marfrig said a merger would result in “the creation of a world leader in the protein market with wide geographical and product diversification” and reduce risk and “exploit operational and financial synergies due to the balance and complementarity of products, services and geographic diversification”.

News agency Reuters pointed out a deal would combine BRF’s poultry business, which leads the world in chicken exports, and Marfrig’s beef business, which is second to JBS globally. 

It reported that their combined market capitalisation was BRL27.8bn (US$7bn) at market close on Thursday (30 May).

Quoting two people with knowledge of the talks, Reuters said the two companies are expected to reach an all-share deal, with no cash payments while other sources close to the companies said their aim is to create a complete protein portfolio to compete with global giants such as Tyson Foods, JBS and China’s WH Group.

The companies said they were entering a 90-day negotiation period to define the terms of a deal.

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