(Recasts, includes comments and context, updates share prices)
By Roberto Samora and Marcelo Teixeira
SAO PAULO/NEW YORK, Feb 8 (Reuters) - Brazil's Raizen, the
joint venture between Royal Dutch Shell Plc and Cosan
SA, has agreed to buy Biosev SA, the sugar
and ethanol unit controlled by Louis Dreyfus, in a
cash-and-stock deal, the companies said on Monday.
Raizen will pay 3.6 billion reais ($670.3 million) to Biosev
shareholders, who will also receive 3.5% of Raizen preferred
shares, plus 1.49% of redeemable shares, it said in a regulatory
filing. The company declined to disclose the full purchase
price.
The deal boosts Raizen's position as the world's largest
sugar maker at a time when sugar prices are near the
highest levels in four years. It also increases Raizen's
footprint in South America's energy market.
After the acquisition, the company will operate 35 mills in
Brazil with a sugar cane crushing capacity of 105 million tonnes
per year, equivalent to 17% of Brazil's center-south crop in
2019/20. Biosev and Raizen produced nearly 5 million tonnes of
sugar and 3.84 billion liters of ethanol in 2019/20.
"It was a great opportunity. Biosev has good plants; they
have a good operation. The problem there was financial, not
operational," Raizen's Chief Executive Ricardo Mussa told
Reuters.
"Biosev has a larger flexibility to shift production from
sugar to ethanol. It will fit well into our strategy to expand
ethanol production."
Raizen, which recorded net revenues of 120 billion reais in
2019/20, is a large fuel distributor in Brazil and Argentina.
The company of late has bid on refineries owned by Brazil's
state-run Petrobras.
Biosev shares were up 6% in Brazil, while shares of Cosan
SA, Shell's partner in the Raizen venture, rose 4.4%.
The sale of Biosev continues Louis Dreyfus' overhaul of its
finances after it agreed in November to sell a 45% stake in its
main commodity-trading business Louis Dreyfus Company B.V. (LDC)
to Abu Dhabi's state-owned investment firm ADQ.
Louis Dreyfus did not disclose the transaction price with
ADQ at the time, but specified that at least $800 million of the
proceeds would go toward repaying a $1 billion loan LDC had made
previously to bail out Biosev.
Biosev's debt of around 7.7 billion reais was not included
in the deal and will remain with its current shareholders.
The company said it is in talks with banks to refinance debt
of 4.13 billion reais expected to remain after Raizen's cash
payment of 3.6 billion reais.
The Raizen-Biosev agreement also includes an earn-out
payment of up to 350 million reais to be made by Raizen to
Biosev shareholders after the fifth anniversary of the closing
date, which will depend on sugar and ethanol prices.
Dreyfus has been looking at options for highly indebted
Biosev for years, including finding a partner or selling the
company.
Since most of Biosev's debt was in foreign currency, the
sharp devaluation of the Brazilian real in the last two
years has worsened its debt burden.
($1 = 5.3704 reais)
(Reporting by Roberto Samora and Marcelo Teixeira; Additional
reporting Gus Trompiz, in Paris, and Tatiana Bautzer, in Sao
Paulo; Editing by Jan Harvey and Lisa Shumaker)
