Brazil’s largest food company Perdigao and smaller rival Sadia today (19 May) announced a long-awaited merger that will see the creation of the world’s largest poultry company.

A new company, Brasil Foods (BRF), will be formed through the share-swap agreement, the companies announced in a joint statement. The new group will be based in Itajai, Brazil.

Between them, Perdigao and Sadia also have interests in the dairy sector and make frozen foods, pizza, pasta, margarine and desserts.

Sadia shareholders, who will first have their shares transferred to shares in holding company HFF Participacoes, will receive 0.132998 common shares in BRF per share held.

Brasil Foods will issue BRL4bn (US$1.92bn) in stock as part of the merger deal.

In March, Sadia posted its first annual loss in company history after large losses on currency derivatives during the last three months of 2008.

Last week, Sadia posted a net loss during the first quarter of 2009 but confidence that exports would recover led the company to stick to its margin targets.

Perdigao also booked a first-quarter loss due to a tax loss on its Perdigao Agroindustrial subsidiary.