Brazilian meat company Marfrig has received competition clearance from the European Commission for its acquisition of the OSI group's operations in Brazil and Europe.
The Commission gave its decision on 14 October, after reviewing horizontal overlaps between Marfrig and the OSI companies in sales of fresh and processed chicken products. It also considered a potential vertical link between the parties' fresh chicken production and the OSI companies' processing activities in Europe.
Lois Moore of Shearman & Sterling LLP, who advised OSI, says, "'This transaction was significant because it involved a Brazilian company venturing outside its home market for the first time and making a successful deal in Europe - which is indicative of the current economic recovery in Brazil."

George Milton, also of Shearman & Sterling LLP adds, "the decision is consistent with the Commission's previous approach to market definition, and on any applicable market definition there were no significant impediments to competition."
Marfrig agreed to buy the US meat processing group's assets for US$900 million in cash and stock in June this year.
In Brazil, the company's main operations include rearing live animals for slaughter, and producing fresh and processed meat products both for the domestic market and for export. In Europe, it is limited to supplying fresh and processed meat products, with the acquisition of OSI assets part of a plan by Marfrig to double its poultry capacity.
The OSI group's Brazilian companies sell fresh and processed meat products to customers in Brazil. Its European companies acquired by Marfrig rear live poultry and supplies fresh and processed poultry.

The Commission found that Marfrig's sales of processed chicken products in Europe are limited to a small number of sales of canned chicken products in the UK, and that the although OSI's Brazilian companies export to Europe, their exports comprise a limited number of sales of processed poultry.

On that basis, it decided that the companies' activities overlap in Europe only to a very limited extent, and that the transaction would not impede competition in the EU.
Says Moore, "It is important for Brazilian companies with significant export sales to be aware of the merger control regime in Europe, since, unlike Brazil's regime, a deal generally cannot close without clearance from the Commission.'
The transaction has also been referred to Brazil's competition agency CADE, which has yet to rule on the matter.

Counsel to Marfrig Frigorificos & Comercio de Alimentos
In-house counsel - Heraldo Geres
Partner Carlos Barbosa Mello
Partners Alberto Luzárraga, Andrew Janszky and Lois Moore and associate George Milton
Counsel to OSI Group
Partner José Samurai Saiani and associate Cristiana Rebelo
Herbert Smith LLP
Partners Stephen Wilkinson, Craig Pouncey and Alex Kay and associates John Cook, Stephen Pardy and Jenny Coombes
(LatinLawyer - 16.10.2008)