Brazil-Sadia Merger looks likely to happen.

Sadia S.A. and Perdigao S.A. are contemplating a merger amid a global economic recession that is hitting Brazilian protein companies hard, according to international media reports.

Sadia said it was considering "the viability and the convergence of interests in some type of association" with larger rival Perdigao.

Sadia reported a fiscal third-quarter net loss of 777 million reais (US$342 million) primarily on foreign exchange derivatives losses.

Looming debt repayments have forced Sadia to consider merging with Perdigao, Bloomberg reported, citing a report by Credit Suisse analyst Marcel Moraes.

He noted Sadia has 3.5 billion reais (US$1.5 billion) in short-term debt, most of which is due in the third quarter of this year, and the company may seek financing from BNDES, Brazil’s national development bank.

"Time is running out for [Sadia], which brings the two companies closer," Moraes wrote. "We believe BNDES would probably try to bring the two companies closer together, creating one of the leading food companies worldwide."

Sadia reportedly said it hasn’t reached an agreement with Perdigao and is also talking to other possible partners.