Brazil’s competition regulator has imposed temporary restrictions on Perdigao’s BRL1.4bn (US$710m) merger with local peer Sadia.
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The Conselho Administrativo de Defesa Economica (Cade) said that both companies must continue to operate separately until it comes to a final ruling on the proposed deal.
According to the merger agreement, Perdigao will change its name to Brasil Foods and Sadia will operate as a subsidiary of the enlarged group through a share-swap deal.
However, Cade has barred Perdigao from exercising operational, financial or logistical control over Sadia, a spokesperson for the competition regulator told just-food.
The companies and Cade have signed a ‘reversibility accord’ that will prevent Perdigao and Sadia from merging distribution and manufacturing operations or exchanging sensitive information.
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By GlobalData“In putting a hold on the merger, we will be able to reverse the takeover should the conclusion be reached that it is detrimental to competition,” the spokesperson said.
Nevertheless, Cade will allow Perdigao to carry out its financial restructuring plan of Sadia.
One New York-based analyst told just-food that while the news has raised “some doubt” as to whether the deal will go ahead without interference from the competition authorities, it is by no means “dead in the water”.
“There could be some competition issues – both companies operate, and currently compete, in the same sectors… It is impossible to say at this stage what degree of restrictions will be imposed. What this move does is show that Cade is prepared to flex its muscle on the issue,” the analyst said.
