Brazil's BRF, Saudi Arabian fund set up poultry joint venture
Brazilian chicken and pork processor BRF SA (BRFS3.SA) signed a memorandum of understanding with Saudi Arabia's sovereign fund to create a joint venture to make poultry products in the Middle Eastern country, sending its shares higher.
BRF said in a securities filing on Thursdaythat it will hold a 70% stake in the joint venture, while Saudi Arabia's Public Investment Fund (PIF) will have the remaining 30%.
The MOU is non-binding and aims to create a company to produce and sell fresh, frozen and processed poultry products. BRF declined to provide additional details about the move as it is in a quiet period ahead of a shareholder vote on Monday to decide on a follow-on share offering.
The Brazilian company said the joint venture will require a $350 million investment if it materializes.
Shares in BRF were up 3.7% at 24.72 reais in morning trading, making it one of the top gainers on Brazil's Bovespa index (.BVSP), which rose 0.3%.
The move underscores BRF's strategy to keep a relevant stake in the so-called halal food market, where food must be prepared according to Muslim dietary requirements.
Brazil is the world's biggest halal meat supplier, selling chicken and beef in profitable Islamic markets across the globe.
Itau BBA analysts saw the deal as positive for BRF, saying it was in line with the two sides' long-term goals and is accretive for BRF's operations in the Middle East, defending its "strong brand positioning within the region."
Saudi Arabia is Brazil's fourth-biggest chicken customer, having imported 353,500 tonnes in 2021, according to trade data compiled by meat industry group ABPA, which represents Brazilian producers and exporters.
The volume represents a 24.4% drop from the previous year, as the Saudis are trying to reduce imports and boost local production of chicken products.