Brazil imposes limits to Perdigao's Sadia takeover

SAO PAULO, July 8 (Reuters) - Brazil's antitrust regulator imposed temporary restrictions on Perdigao's (PRGA3.SA) 1.4-billion-real ($710 million) takeover of rival foodmaker Sadia (SDIA4.SA) until a final ruling on the transaction is made.

Under the accord, both companies will operate separately, the Brasilia-based regulatory agency, known as Cade, said in a statement late on Tuesday. Cade banned Perdigao from exercising any type of operating, financial and logistic control on Sadia.

Cade will allow Perdigao to carry out a financial restructuring plan of Sadia, the statement said. Currently, Perdigao is planning to sell stock on behalf of Brasil Foods, as the combined company will be called.

Cade said the move gives it much-needed muscle to reverse the takeover should it poses a threat to free competition.

Under the so-called reversibility accord signed between Cade and the companies, Perdigao and Sadia cannot merge their distribution units. They must also preserve existing brands and factories and limit contact and information exchange between executives until a final ruling be made.

Several Cade councilors have complained for years of an apparent erroneous perception among investors that mergers and acquisitions face little regulatory scrutiny in Brazil. Currently, the agency is drafting a reform of antitrust laws.

Sadia shares dropped 2.9 percent on Tuesday to 5.05 reais. Perdigao's common stock fell 2.1 percent to 40 reais. ($1=1.99 reai) (Reporting by Guillermo Parra-Bernal; Editing by Derek Caney)