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  • Short Opportunity? BR Foods Shares Tumble 7.13% After Antitrust Restrictions 0 comments
    May 10, 2011 11:15 PM | about stocks: BRFS
    Contrary to the upward trend of the Bovespa Index (+0.39%), shares of BR Foods (BRFS3, NYSE:BRFS) tumbled 7.13%, ending trading at R$ 29.58 in Brazil - its lowest level reached in the intraday - reflecting the news that antitrust federal agency Cade (Administrative Council for Economic Defense) has issued an statement in which it sets a signal against the merger between Sadia and Perdigao, BR Foods main brands.

    Competition and benefit to consumers

    BR Foods reported this morning that it received the statement from Cade, which conditions the merge to the entry of a third competitor with market relevance and/ or the transfer of the benefits to consumers.

    "Given the absence of relevant barriers to entry, the existence of intense rivalry and generation of substantial synergies and efficiencies that will be passed on to the final consumer, BR Foods remains confident in the transaction approval by CADE" wrote BR Foods in a statement. take

    Even with the drop after the news, the stock is expensive. I am staying out of the stock but if I were to bet in any direction it would be on the short side. The stock has been in a strong uptrend for the last 5 months and is still close to its all-time high and this news will impact the company considerably if confirmed.
    Of course, if they can really revert the decision, this may become a long opportunity. I like the stock: it's worth keeping an eye on it and buy depending on how much it falls from here. I probably wouldn't buy until I see another 20% drop from today's level though.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Themes: Food, Antitrust, Brazil Stocks: BRFS
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