Marfrig to raise $543 million from share sale amid debt woes

SAO PAULO Wed Oct 24, 2012 7:54am EDT

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SAO PAULO (Reuters) - Marfrig Alimentos SA (MRFG3.SA) plans to raise up to 1.1 billion reais ($543 million) in a stock offering to bolster its capital base amid concern over the second-biggest Brazilian food processor's ability to refinance debt.

The São Paulo-based company filed before Brazil's investment banking association Anbima a preliminary analysis of the plan, which involves the sale of new shares in a primary offering, according to a regulatory filing on Wednesday. MMS Participações, Marfrig's largest shareholder, will be allowed to buy shares in the offering, the filing added.

Marfrig has struggled to cut debt after snapping up more than a dozen rivals to better compete with BRF Brasil Foods SA (BRFS3.SA), the world's largest poultry exporter, and other rivals in Brazil's fast-growing processed food market. Shares of the company have plunged 14 percent since last September, when speculation over a share offering began to mount.

Marfrig lost a combined 10 percent between Monday and Tuesday, the stock's steepest two-day decline since June, because of the potential shares sale, traders said.

The offering comes days after rival Minerva SA (BEEF3.SA) and its controlling shareholder agreed to offer stock in a similar transaction aimed at raising a minimum 442.1 million reais ($218 million).

This month, the company had to include 2.5 billion reais of convertible debt on its balance sheet owed to state development bank BNDES. The move would boost Marfrig's debt to the equivalent of 4.8 times earnings before interest, tax, depreciation and amortization over the past 12 months, from 3.7 percent at the end of June.

Marfrig, like most of the animal proteins sector, is struggling with high feed prices in its pork and poultry divisions after the drought in the United States and South America sent prices for corn and soy sky-rocketing. Earlier this year, the company sold some Europe- and U.S.-based assets to Martin-Brower Co. for about $400 million.

The company also posted net income of 10.4 million reais in the third quarter, reversing its 540 million reais loss from a year earlier, according to a separate filing.

(Reporting by Guillermo Parra-Bernal and Reese Ewing; Editing by Lisa Von Ahn and Chizu Nomiyama)

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