One billion eggs: Katayama Alimentos seeks buyer

One billion eggs: Katayama Alimentos seeks buyer

Katayama Alimentos’ controllers hired Itaú BBA to sell the company, Pipeline learned. The company is one of the largest in the country in the production and sale of eggs (in natura, liquid and powder), founded 80 years ago by the family of Japanese origin – there are just over 1 billion eggs per year, produced by 4 million people. chickens, between rearing and laying, and 250 thousand quails.

Four sources assure that the process is already underway and the bank has approached potential strategic buyers as well as investment funds. The CEO and shareholder, Gilson Katayama, denies the information.

Headquartered in Guararapes, in the interior of São Paulo, the Katayama farm disputes the third place in the market led by Mantiqueira, which earns more than R$ 1 billion, and the Faria Group. According to two executives who know the industry well, the company earns between R$250 million and R$300 million with eggs.

Katayama’s sale process comes after two difficult years for the egg industry. After a golden decade, when per capita consumption jumped from 148 eggs in 2010 to 257 eggs in 2021, farmers suffered from the soaring of grains, basic inputs in chicken feed.

One of the main indicators of margin is the relationship between the price of the egg and the feed. Historically, 2 to 3 eggs were needed to buy a kilo of feed. In recent years, however, the expensive grain has driven that ratio up to 4.5 times, squeezing margins. Recently, the ratio has returned to 3.5x, which means margins are still tighter than usual.

One of the reasons for seeking an investor is that egg farms need to undergo a revolution, recalls one source, abandoning the prevailing practice of producing eggs with caged hens for free-range birds.

“A farmer may need to increase the infrastructure by five times to make this change”, calculates this executive. If you don’t invest in the transformation, the farms can end up without a market. Gradually, major retailers and restaurant chains set deadlines for them to only buy eggs from cage-free hens.

In Brazil, eggs from free-range hens still represent little (from 2.5% to 5%) of total production, but the transformation demanded by the demands of civil society shows that it is a path of no return. In the US, it took a decade for the indicator to reach 50%.

The expectation of those who know the farm business, which is still dispersed in an infinity of players, is that investments in modernization of production standards will end up causing a movement of consolidation, reducing the number of actors.

This potential consolidation movement is what made some funds, such as Pátria, look at Katayama’s business, Pipeline learned. But the characteristics of the sector make a transaction between farmers more likely, the sources said.

In this scenario, the most capitalized should prevail, in the case of Grupo Faria. In a market not used to M&As, Ricardo Faria’s company was one of the most active in acquisitions, investing more than R$ 1 billion in the last five years. Since 2019, there have been at least four acquisitions (ASA, Iana, Ovos Prata and Alex Alves).

Sought by Pipeline, Katayama Alimentos said that the contracting of a bank for the sale of the company “does not proceed.” The CEO claims not to know the origin of this information.

Source: Value Pipeline

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