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Welcome to the World, BRF Brasil Foods

May 19, 2009 – Comments (2) | RELATED TICKERS: SDA , PDA , TSN

The big news out of Latin America this morning is that Brazilian food processors Sadia (SDA) and Perdigao (PDA) are merging. You may remember Sadia for its epic $400mm currency "hedging" loss by a few "rogue traders" that essentially crippled the company.

The company never seems to have recovered from that and coupled with the recent volatility of commodities prices, a merger here ultimately made sense. The new company will be the largest poultry processor in the world, overtaking Tyson Foods (TSN).

One thing to keep in mind if you're contemplating BRF Brasil Foods as an investment is that despite the name, it's not actually a pure-play on Brasil. This is a huge multinational company with sales worldwide and that subjects it to both commodity and currency hedging risks. It's also quite a capital intensive operation, though Sadia was trying to amp profit margins by selling fewer raw commodities and more and more processed, branded ready-to-eat meals.

Discussion of the merger continues on our Global Gains discussion boards. (Membership required; get one here.)