Proposed Merger of Perdigão and Sadia
(10 pages of text)
In April 2009, Perdigão was contemplating the acquisition of Sadia and a merger of the two companies. The intended share-swap transaction between two of Brazil’s biggest food companies would allow Perdigão to dramatically grow its domestic and international market share, and become one of the world’s largest players in the food production industry, while driving up profit margins by benefiting from synergies. However, Sadia had very significant short and long debt that it was unlikely to be able to service. Students must determine whether Perdigão should acquire Sadia and the basis of the proposed share exchange, and assess whether the resulting debt burden of the combined companies is manageable.
This case is appropriate for an advanced MBA course in financial management, mergers and acquisitions, or international finance. It could also be taught in a strategy course, although the finance components are quite challenging (e.g. valuing a company using discounted cash flow and calculating weighted average cost of capital, or WACC).
Brazil, Large, 2009
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