The merger of Perdigao S/A (PDA) and Sadia S/A (SDA) is likely to boost the exports and help tap new markets such as China, industry analysts said Tuesday.

The long-awaited action makes the new merged company, Brasil Foods, one of the largest food companies in the world, with combined revenues estimated at BRL22 billion ($10.7 billion)).

Jose Vicente Ferraz, director of Institute FNP, a large agribusiness research and consulting firm, said the merger creates a "gigantic" food company with strength to further propel exports.

"Through synergies the two companies should see cost savings, and this should make their exports more competitive," Ferraz said. "This should lead to an increase in exports."

Ferraz said Brasil Foods should be able to export more goods to markets such as Russia - the No. 1 importer of chicken products - Europe, the Middle East and Japan.

Brasil Foods also will be well positioned to benefit from poultry export straight to China, said Ferraz.

Under an agreement signed by Chinese and Brazilian officials Tuesday, Brazil can begin to export poultry products to China from more than 20 Brazilian plants that have already been inspected by the Chinese animal health authorities. Previously, Brazilian poultry exports needed to pass via Hong Kong.

"China is a market of huge potential, and now Brazilian companies for the first time can ship their poultry there without going through Hong Kong," Ferraz said.

Ferraz estimates that costs could be cut by around 10% on Brazilian chicken exports by removing port tariffs and freight costs for shipments that pass through Hong Kong.

Brasil Foods will have a strong position in the domestic meat market, Ferraz said, but won't automatically be the king of the hill. He said the company will still face strong competition from companies such as Cargill, Tyson Foods (TSN), Doux Frangosul and local company Aurora Frango.

He added that customers can also easily switch between chicken or meat products and therefore Brasil Foods will be unlikely to inflate prices.

Lygia Pimentel, an analyst at Scot consultancy, agreed that the two companies will combine their muscle to hike exports of poultry and meat products to markets such as the Middle East and Russia.

Sadia already has a plant in Russia and can leverage this with new investment.

The company has more than 50% of the market in segments such as salami sausage products so may see restrictions from Brazil's Consumer Affairs Division, or SDE, and antitrust regulator CADE. - Pimentel also warned that having fewer competitors in the market may lead to lower prices for livestock producers.

Maria Paula Valente, an analyst at consultancy FC Stone, said the merger is part of a growing trend in the Brazilian meat sector. Meat companies such as Marfrig are currently assessing opportunities to snap up struggling rivals.

Brasil Foods can benefit from synergies in areas such as logistics and should help to further professionalize the sector, she added.

In the area of feed stock, an analyst at a Brazilian consultancy said the merger is unlikely to impact Brazilian soy or corn meal sales. Soy and corn meal are used by companies for animal feed.

"These companies existed previously and are unlikely to cut volumes for their animal feed," he said.

The analyst said, however, that operating as one company will lead to one strategy rather than two. As a result, this could benefit or prejudice some traders as they need to buy from just one company with a single strategy.

A trader at a major U.S. soy and soymeal exporter said the merger shouldn't change the volumes of soymeal bought or sold.

The trader said the merged companies might close some overlapping operations or plants, which could cut sales.

-By Tony Danby, Dow Jones Newswires; 55-11-2847-4523; Anthony.Danby@dowjones.com