Sadia and PerdigaoA Brasilian Food Superpower

Mandate

Mandate Strategic Rationale Valuation Implementation

How should Perdigao approach the merger with Sadia

Moving ForwardStrategic RationaleValuation

Recommendation

Mandate Strategic Rationale Valuation Implementation

Offer a swap ratio of 0.27 shares per Common Sadia shareOffer swap ratio of 0.22 per NC and Preferred share

Will result in first year accretion of $1.81

Rationale

Post-Merger Snapshot

Mandate Strategic Rationale Valuation Implementation

Perdigao (Now)

• EBITDA of• Player if the

agribusiness• Select product

segments

Brazil Foods SA (Post-Merger)

• EBITDA of• Dominate leader in

Market• Compete across varied

product segments• Take advantage of

scale

Brazil: Growth in Agribusiness

Mandate Strategic Rationale Valuation Implementation

Brazil is the dominate agribusiness environment

• Lower input costs• Specialized Labour & climate• Conducive Exchange rate

Increasing World Consumption

• Poultry and Pork (8%) - Beef (4%)

Scale is the key success factor

• Very competitive and concentrated industry

There is a growing Food industry with a focus on scale

The Benefits of the Merger

Mandate Strategic Rationale Valuation Implementation

• Dominate across several segment• Widen product offering• Leverage Sadia’s brand power

Brazil Foods becomes the Market Leader

• 3 Billion in synergies• Lower sales expense and SG&A expenses• Cost savings from distribution and production

Take advantage of scale

• Inspire sense of national pride• Ability to efficiently on the international level • Stave off foreign competition

National Champion

A merger would create a leading company for Brazil

Why is ‘Now’ the Ideal Time?

Mandate Strategic Rationale Valuation Implementation

Avoid Foreign Bidders

Lower amount of buyers ‘First Mover’ advantage on Sadia

Prices are low due to the financial crisesLow amount of bidders Poor financing conditions for M&A

Sadia is in a weak positionOn the brink of bankruptcy Losses due to poor hedging

Now is the ideal time to merge to have the best return

The Decision to Merge

Mandate Strategic Rationale Valuation Implementation

Become Market Leader

Capitalize on Scale

Sadia in a weak position

Merge Now

Valuation

Valuation Overview

Mandate Strategic Rationale Valuation Implementation

Pro Forma

Accretion/Dilution

ValuationDCF Share Swap Ration

ProjectionsSadia Income Statement Sadia Cash Flow

Sadia Standalone

Mandate Strategic Rationale Valuation Implementation

Interest expenses creates a drag on Sadia earnings

Sadia Standalone Income Statement2007 2008 2009 2010 2011 2012 2013

Net Sales 8,708 10,729 11,802 12,982 14,280 15,708 17,279Growth 23% 10% 10% 10% 10% 10%

COGS 6,312 8,109 8,920 9,812 10,793 11,872 13,060Gross Profit 2,396 2,620 2,882 3,170 3,487 3,836 4,220Selling Expenses 1,464 1,727 1,872 2,060 2,266 2,492 2,741G&A 114 159 172 190 209 229 252Other Income (Expense) (83) (38) 0 0 0 0 0EBIT 735 696 837 921 1,013 1,114 1,226Interest Income (Expense) 132 (3,892) (467) (276) (202) (144) (99)Income Tax (100) 703 74 129 162 194 225Other 1 10 0 0 0 0 0Net Income 768 (2,483) 444 774 974 1,165 1,352

Sadia Cash Flow Statement2009 2010 2011 2012 2013

Net Income 444 774 974 1,165 1,352Less: Change in WC 161 177 195 214 236Add: D&A 708 779 857 400 700Cash from Operations 991 1,376 1,636 1,351 1,817

Capital Expenditures 500 200 400 400 700Investing Activities (500) (200) (400) (400) (700)

Debt Repayment 4,164 1,126 939 664 577Equity IssuanceFinancing Cash Flow (4,164) (1,126) (939) (664) (577)

Beg Cash 3,509 (164) (114) 183 470Change in Cash (3,673) 50 297 287 540Ending cash (164) (114) 183 470 1,010

Sadia Standalone – Cash Flow

Mandate Strategic Rationale Valuation Implementation

Sadia will be hard pressed to finance debt repayments

Valuation – Sadia WACC

Mandate Strategic Rationale Valuation Implementation

Sadia WACC estimated to be roughly 10.8%

Sadia WACCCost of Debt 7.2%Tax Rate 20%Tax Effected Cost of Debt 5.8%Target Debt Weight 65%

Risk Free Rate 2.87%Levered Beta 1.57Market Risk Premium 5.65%Country Risk Factor 2.57%Default risk 5.7%Cost of Equity 20%Target Equity Weight 35%

WACC 10.8%

Levered BetaUL Beta 0.63Target debt 0.65Target Equity 0.35Target D/E 1.86Tax Rate 20%Levered Beta 1.57

Sadia Discounted Cash Flow2009 2010 2011 2012 2013 Terminal

EBIT 837 921 1,013 1,114 1,226Less: Cash Taxes 167 184 203 223 245NOPAT 670 737 810 892 981Plus: D&A 708 779 857 400 700Less: Capex 500 200 400 400 700Less: Change in WC 161 177 195 214 236FCFF 717 1,139 1,073 677 745 11,948

PV Factor 90% 82% 74% 66% 60%PV FCFF 647 928 790 450 447 7,171

Valuation – Sadia DCF

Mandate Strategic Rationale Valuation Implementation

D&A assumption is adjusted to reflect lower capital spending

Valuation – Swap Ratio

Mandate Strategic Rationale Valuation Implementation

Total Share issuance of roughly 160 million

ValuationPV 2009-2013 3,263PV Terminal 7,171Enterprise Value 10,433Less: Debt 8,549Plus: Cash 3,509Equity Value 5,393

Swap RatiosCommon Shares % 37%Common Equity Value 2,019Common Per Share 8.01Current Share Price 4.58Perdigao 30day Avg Price 29.50Common Swap Ratio 0.27Shares Issued for common 68.47

Preferred Shares % 63%Preferred Equity Value 3,374Preferred Per Share 6.41Current Share Price 3.28Preferred and NC Ratio 0.22Shares Issued for NC and Pref 91.51

Proforma

Mandate Strategic Rationale Valuation Implementation

Very accretive deal for all shareholders

Proforma Combined Income Statement2007 2008 2009 2010 2011 2012 2013

Gross Sales 17,698 25,353 28,100 31,376 35,050 39,171 43,797Deductions 2,357 3,231 3,623 4,055 4,540 5,085 5,699

Net Sales 15,341 22,122 24,477 27,322 30,510 34,086 38,098COGS 11,072 16,743 18,525 20,678 23,092 25,799 28,836

Synergies 150 150 150 150 150Gross Profit 4,269 5,379 6,102 6,793 7,568 8,437 9,412Selling Expenses 2,743 3,618 4,062 4,535 5,064 5,657 6,323

Synergies 5% 5% 5% 5% 5%G&A 90 159 342 381 426 476 532

Synergies 20% 20% 20% 20% 20%Other Income (Expense) 5 (262) 0 0 0 0 0EBIT 1,441 1,340 1,970 2,181 2,417 2,682 2,980Interest Income (Expense) (105) (630) (735) (470) (341) (213) (116)Income Tax (32) 255 541 530 552 579 619Other (50) (17) 0 0 0 0 0Net Income 1,254 948 1,776 2,241 2,628 3,049 3,483Shares Out 367 367 367 367 367EPS 4.84 6.11 7.16 8.31 9.49Accretion/Dilution 1.81 2.05 2.11 2.07 2.07

Proforma Debt

Mandate Strategic Rationale Valuation Implementation

Very accretive deal for all shareholders

Proforma Combined DebtPerdigao Debt 2009 2010 2011 2012 2013Beginning 5,364 3,718 2,851 1,871 480Repayment 1,646 867 980 1,391 373Ending 3,718 2,851 1,871 480 107Interest 267 193 139 69 17

Sadia Debt 2009 2010 2011 2012 2013Beginning 8,549 4,385 3,259 2,320 1,656Repayment 4,164 1,126 939 664 577Ending 4,385 3,259 2,320 1,656 1,079Interest 467 276 202 144 99

Combined 2009 2010 2011 2012 2013Beginning 13,913 8,103 6,110 4,191 2,136Repayment 5,810 1,993 1,919 2,055 950Ending 8,103 6,110 4,191 2,136 1,186Interest 735 470 341 213 116

Proforma Cash Flow

Mandate Strategic Rationale Valuation Implementation

Merged company will be able to support debt repayment

Proforma Cash Flow2009 2010 2011 2012 2013

Net Income 1,776 2,241 2,628 3,049 3,483Less: Change in WC 322 354 389 428 471Add: D&A 1,469 1,639 1,831 2,045 2,286Cash from Operations 2,923 3,526 4,069 4,665 5,298

Capital Expenditures 1,000 700 900 900 1,200Investing Activities (1,000) (700) (900) (900) (1,200)

Debt Repayment 5,810 1,993 1,919 2,055 950Equity IssuanceFinancing Cash Flow (5,810) (1,993) (1,919) (2,055) (950)Beg Cash 5,485 1,812 1,862 2,159 2,446Change in Cash (3,887) 833 1,250 1,710 3,148End Cash 1,598 2,646 3,112 3,869 5,593

Implementation

Implementation

Spin-off

Regulatory option Secondary beneficial option

DerivativesControl measures Forward contracts for foreign debt

Share SwapSwap ratio Controlling parties

Mandate Strategic Rationale Valuation Implementation

Timeline

Mandate Strategic Rationale Valuation Implementation

Apr-09 May-09 Jun-09 Jul-09Hire BankersSpeak with regulatorsPropose LOIDue DiligenceClose Merger

Regulators are the deal breaker

Derivative

Controlling measures

• Control is limited to 10% above/below the 6 months export amount

Forward contracts for debt

• R$ 5,114.7M (Saida)à• R$ 4,139 M (Perdigao)• Total debt 13,914 66% is will enter foreign forwards

contracts

Major unpredictable fluctuations in inflation and currency rates are protected

Mandate Strategic Rationale Valuation Implementation

Regulatory spin off

Mandate Strategic Rationale Valuation Implementation

• Before: 8956.7 – 35% of revenue• After 7371.7 – 29%• Target Domestic and frozen

Poultry

• 12% of Revenues 1,463• Big in exports

Pork /beef and others

Targeting domestic will satisfy regulators

Ownership Structure

Existing Perdigao shareholders will own 56% of the Merged Company

OwnershipMillion Shares % total

Perdigao SH 207 56.4%Sadia NC 92 24.9%Sadia Common 68 18.7%Total 367 100%

Mandate Strategic Rationale Valuation Implementation

Conclusion

Thank you

Mandate Strategic Rationale Valuation Implementation