Tuesday, 20 January 2009

LatinFinance Reports Sadia Said to Be Looking for Equity Injections

Brazilian food producer Sadia, the first big company in Brazil that last year reported losses for bad bets on derivatives, is said to be looking for 1.5 billion reais in fresh capital, according to LatinFinance, the New York-based finance magazine and newsletter. Sadia is apparently courting private equity funds for money, LatinFinance said, citing market sources. Such an injection of new capital would likely dilute the participation of current majority shareholders. LatinFinance says that Sadia´s market capitalization doesn't reach 3 billion reais.

''The move demonstrates how debilitating losses such as the ones taken by Sadia, Aracruz and Votorantim can be,´´ LatinFinance writes, and it seems to me there is no better conclusion than that. These companies thought that they would be willing to get away with the losses, but fortunately that hasn't been the case. Brazil faces a serious problem of weak corporate governance enforcement -- and that is not necessarily the fault of the regulatory agency but of its meager budget and enforcement capabilities. The government should be more committed to implementing clearer rules and enforcing them effectively. But ... one skeptical mind could think that such mess in the corporate sector is beneficial to President Lula's goal of increasing state participation in the private economy sphere -- or take companies hostage by offering them funding and political perks.

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