BRFoods seeks more time to negotiate merger terms

BRASILIA (Reuters) – Brasil Foods executives urged Brazilian antitrust authorities Monday to postpone ruling on the merger that created Brazil’s largest processed food company, saying they need more time to elaborate their case.

Brasil Foods Chief Executive Jose Antonio Fay and a senior vice president held preliminary talks with two board members of Cade, the antitrust body, to make the case for a delay in issuing a ruling. The case is scheduled to be discussed on Wednesday.

Carlos Ragazzo, the Cade board member who investigated the merger, voted last week against the transaction, saying it harmed competition in the country. Brasil Foods executives said they need more time to present amendments to the original merger agreement to avert incurring billions of reais in losses.

The other three members of Brasilia-based Cade’s board still have to cast their votes on the merger. Board member Ricardo Ruiz last week sought to delay discussion of the ruling, but indicated he could side with that of case sponsor Ragazzo.

“If we wanted to engage in a negotiated solution to this, we would need more time to discuss it,” Wilson Mello, Brasil Foods’ senior vice president for institutional affairs, told reporters in Brasilia, after the visit to the Cade members.

Brasil Foods is one of the country’s biggest government-engineered mergers and part of former President Luiz Inacio Lula da Silva’s efforts to create home-grown conglomerates in sectors he deemed strategic, such as commodities, food processing and telecommunications.

Brasil Foods was formed two years ago after food processor Perdigao agreed to take over bigger rival Sadia, which was on the brink of bankruptcy after reporting billions of dollars in derivatives-related losses during the global financial crisis. The government facilitated the transaction by deploying large credit lines through its state development bank BNDES.

Neither Ricardo Ruiz or Alessandro Octaviani, the two Cade members who agreed to meet with Fay and Mello, gave their word for a postponement of the ruling, Mello noted. Any sign by Cade members that they would be willing to negotiate will probably be known on Wednesday, he noted.

Local media reported over the weekend that Brasil Foods could propose to Cade the sale of the factories as well as offer to raise the number of brands it would sell off.

The company had already offered to dispose of several brands equivalent to about 1.5 billion reais ($940 million) in revenues, but the proposal was rejected by the Cade member because they were less relevant to Brasil Foods’ core business.

The company is now considering adding dairy products brand Batavo to the list of brands up for sale, according to local reports.

Shares of Brasil Foods plunged 4.6 percent Monday to 24.09 reais.