The CADE has just unanimously approved Minerva’s acquisition of Marfrig’s 13 factories in Brazil, Chile, and Argentina—eliminating part of the overhang that was weighing on the stock.
The only remedy applied by the antitrust body was to require the sale of the Pirenópolis plant—which, in practice, will have no effect on the company.
This plant had been closed since 2010 and had no equipment inside. Minerva itself had already stated that it had no intention of reopening the operation.
Minerva announced the acquisition of these plants in August of last year, paying R$ 7.5 billion for the assets. The transaction also includes three factories in Uruguay, which require approval from the local antitrust body.
The market was already expecting CADE to approve the operation, but many analysts projected this to happen by the end of November, the deadline. With the early approval, Minerva is expected to start operating the assets later this year— the company estimates by the end of October—adding two months of incremental EBITDA for the company.
At the time of the purchase, Minerva estimated that the 16 factories would add R$ 1.5 billion in EBITDA, considering the numbers from nearby factories that the company itself operates.
“But market conditions have changed a lot since then,” said an investor who had bought shares in the company. “Profitability is much better now, because cattle prices have stabilized, domestic meat prices have risen by about 20%, and import prices are 5% higher in dollars, with a currency devaluation of 12-13%.”
These changes in the market scenario could increase the EBITDA of these factories by R$ 150-200 million, according to this investor’s estimate.
However, the numbers from these factories are still uncertain for the market, as Marfrig reported a very different EBITDA at the time of the transaction.
While Minerva projected an EBITDA of R$ 1.5 billion, Marfrig stated that the operations generated R$ 750 million in EBITDA.
The difference is explained by the interests of each company. Minerva wants to show that it bought a business with good profitability. Marfrig, highly leveraged, wants to show creditors that the operation will not take too much EBITDA from its business, which could lead to a breach of its covenants.
“This will only be clarified when Minerva starts operating these plants and discloses their EBITDA separately,” said another investor. “The CADE approval helps reduce the overhang, but it will only be completely eliminated when these numbers become public.”
With CADE’s approval, Minerva will have to immediately disburse R$ 5.35 billion, adjusted by the CDI. The company had already paid R$ 1.5 billion at the signing of the transaction, and another R$ 675 million will only be paid if and when the sale of the Uruguay plants is approved.
The company had already raised the total transaction value last year with a debenture coordinated by JP Morgan.
After the disbursement, Minerva’s leverage is estimated to increase to between 3.5x and 4x EBITDA. The company has told the market that it aims to reduce this ratio to 3x by the end of 2025, with cash flow from operations.
The antitrust body of Uruguay has until December of this year to issue its decision. Initially, the agency had rejected the transaction. After Minerva’s appeal, it stated that it would only make a new decision after CADE gave its opinion.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
