Brazilian media put the value of the deal at up to US$1bn. BRF is Brazil's second-largest food company, and tenth-largest in the world. It owns brands such as Perdix and Sadia, and generates around 30% of its global revenue from the Middle East, worth US$2bn a year.
“[BRF] hereby communicates the market that in line with its international expansion strategy, it has recently entered into a non-binding agreement with Americana, whereby the companies have agreed to cooperate in carrying out a tandem strategic analysis aiming to establish a strategic cooperation in the Middle East region,” said Augusto Ribeiro Junior, deputy vice president for Finance and Investor Relations at BRF, in the statement to the SEC.
Growing regional focus
BRF has been developing its Middle Eastern operations significantly in recent years. It invested US$57m in a factory in the UAE in 2007, and acquired 49% of Abu Dhabi distributor Federal Foods for US$36m in 2012.
Last September BRF signed a US$145m deal to build a new facility in Khalifa Industrial Zone Abu Dhabi. The factory is scheduled to open this year, and will produce 80,000 tonnes of food a year.
Announcing the Federal Foods deal, Antônio Augusto De Toni, foreign market vice president at BRF, outlined the company's regional strategy at the time: “Starting in the [UAE], we are going to reach markets that are more difficult for fresh products, like Iraq. With regard to other countries in the Arab League, import tariffs for food produced in the emirates are cheaper.”
Kuwait-based Americana, formerly known as Kuwait Food Company, has operations across the Middle East, and had sales of US$2.9bn in 2012, with US$165m in profit. Americana employs more than 55,000 people, and operates 17 factories and more than 1,400 stores.
While it has a wide range of consumer food brands, Americana is probably better known for its restaurant operations, which include several high-profile, high-value franchises, such as KFC, Pizza Hut and TGI Friday's.
Given the dominance of BRF consumer food brands, particularly Sadia, in the region, a joint venture would have the potential to create significant value for Americana. The Kuwaiti firm would be able to capitalise on BRF's strength in the consumer food sector, while taking advantage of its local manufacturing and distribution base.