A secret term in National Beef Packing deal displeases Marfrig investors
An undisclosed term in Marfrig- National Beef Packing deal is raising a storm between investors in Brazilian meatpacker Marfrig Global Foods.
The deal worth $969 million includes a clause that gives the right for the owners of the 49% stake to ask for s share buy at "fair value" five years after the deal was signed. The potential liability never appeared in any of Marfrig’s public filings and was only brought to light earlier this week by S&P Global Ratings, informs Drovers magazine.
This cause raised new concerns about the governance issues and lack of transparency in Brazilian meat companies after a series of scandals that hit the industry in the last couple of years.
According to Marfrig’s press office, the National Beef deal assures Marfrig’s capital structure will remain intact until at least 2023, and minority shareholders will be able to sell no more than a third of their shares a year after that. Marfrig also said 15% of National Beef is owned by ranchers with long-term supply contracts with the meatpacker, and they chose not to sell their interest during the Marfrig transaction.
Marfrig never intended to hide any information from investors, according to Chief Financial Officer Jose Eduardo Miron. The put terms had been protected by confidentiality terms until the biggest minority shareholder, Leucadia National Corp., was compelled to disclose it in a little-noticed filing in June, he said.
In the first phase, investors have declared themselves pleased with the deal and the plan that aimed to substantially cut National Beef's debt levels. The first step was to sell chicken-nugget maker Keystone Foods LLC to Tyson Foods Inc. for $2.5 billion. Now, the disclosure of the clause adds to concerns that Marfrig’s leverage will remain elevated even after the Keystone sale, according to a report published by Bloomberg.
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