Brazilian meat companies Marfrig Global Foods SA and BRF SA announced May 30 in security filings that they have started negotiations for a potential merger. If realized, the combined companies would become the fourth-largest global meat company.

According to the filings, the company's board of directors approved the execution of a binding Memorandum of Understandings (MOU) the companies which set rules and conditions for accessing information that allows the companies “to deepen the analysis of the possible implementation of the transaction.”

The MOU provides a 90-day period, renewable for additional 30 days, during which neither party may begin negotiations with third parties. During the timeframe, the companies will evaluate, with their respective legal, accounting and financial advisors, the economic benefits that may result from a merger.

“It is expected that a business combination between the company and Marfrig would raise the combined company to a leadership position in the markets in which it will operate,” BRF said in its filing. “The company also expects the transaction will reduce its exposure to sector risks and generate synergies due to the balance and complementarity of products, services and geographic diversification, with a material presence in Brazil, the United States, Latin America, the Middle East, and Asia.”

As of right now, BRF said the companies have not defined corporate structure for the combination, which it said may include the consolidation of assets of the two companies and their respective shareholders into a new company.

BRF said no new information in connection with the matter will be disclosed during the 90-day period, “unless there are acts or facts that requires a regulatory disclosure obligation.”

Almost one year ago, Marfrig Global Foods acquired 51% interest in National Beef Packing Company. The $969 million acquisition made Marfrig the world’s second-largest beef processor.

BRF, on the other hand, has been struggling to find stability after its involvement in a scandal wherein the company was accused of bribing government inspectors to overlook unsanitary conditions.

Repercussions from the scandal continue as Reuters recently reported that Brazil’s Ministry of Agriculture banned three laboratories that were involved in the scandal from conducting food inspections.