OREANDA-NEWS. Fitch Ratings views the takeover bid by JBS S.A. of 100% shares in Moy Park Holdings Europe Ltd (Moy Park) to be positive for Marfrig Global Foods S.A. (Marfrig) and neutral for JBS S.A. (JBS)'s credit profiles.

If completed under current terms, JBS SA will acquire Moy Park in a transaction valued at USD1.5 billion (cash payment of USD1.19 billion), adjusted by the working capital variation, as well as by the net debt of the Moy Park business at the conclusion of the transaction. This transaction values Moy Park at about 8.6x EBITDA.

The transaction will enhance JBS' strategy to grow its portfolio of prepared and convenient products and to establish a larger footprint in the poultry market in Europe.

For Marfrig this transaction accelerates its deleveraging process as it relies on selling Moy Park instead initiating an IPO as was initially suggested by management this year. Free cash flow generation will improve due to the reduction of interest expenses. This transaction will simplify the company's organization and enable Marfrig to focus in its 'Focus to Win' strategy. Marfrig will remain a global company after the transaction. 59% of its consolidated net revenue will come from international operations. Fitch notes that there were little synergies between Moy Park and Marfrig's other businesses.

At the proposed acquisition price, JBS's leverage would increase just moderately to about 0.2x - 0.3x (from 2.3x as of 1Q15). Fitch expects JBS's net leverage to remain below 3x in FYE16. Pro-forma net leverage for Marfrig will be about 3.7x - 3.5x as of FYE15 instead of Fitch's initial projection of about 4x. Marfrig's management indicated that it does not intend to implement any further disposals and will use proceeds of the disposal to reduce debt. The transaction is subject to regulatory approvals, including the European Union antitrust authorities. It is anticipated that the proposed transaction would close within a few months, most likely in the fourth quarter of 2015.