Marfrig to Minerva asset sale: decoding the wood from the trees

8 minute read

Brazilian meat-processor Minerva has agreed to buy cattle slaughtering and deboning facilities from Marfrig in a BRL 7.5bn deal ($1.53bn). The deal will boost Minerva’s share of Brazilian beef export to 35% from 20% and is seen as transformational by analysts.

We see some relative differences between the sustainability plans for Marfrig and Minerva, with this deal transferring a controversial asset into less responsible hands.

Marfrig is committed to eliminating both legal and illegal deforestation in its supply chains. However, Minerva’s deforestation commitments focus exclusively on illegal deforestation.

There are three main takeaways. Firstly, Minerva is rated with higher environmental risk than Marfrig, for whom the sale represents a re-focus on other activities. The assets to be transferred under the transaction will now be owned by an organisation committed to eliminating only illegal deforestation in its supply chain, which increases overall deforestation risks.

Secondly, Minerva spreads have already widened upon the announcement of the deal, but we see further risks coming from costs associated with recent EU deforestation regulation. Investors should conduct due diligence on Minerva’s plans for complying with the regulation.

Lastly, the size of the combined operations also risk being subject to investment exclusions, as trends towards divesting from cattle-related deforestation increase.

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