Shell-Cosan Brazil JV Raizen to buy Louis Dreyfus sugar & ethanol unit Biosev



by   |  VIEW 1434

Shell-Cosan Brazil JV Raizen to buy Louis Dreyfus sugar & ethanol unit Biosev

Raizen, the Sao Paulo-headquartered third-largest energy company in Brazil, a joint venture of the Anglo-Dutch oil “Supermajor” Royal Dutch Shell and Brazilian Conglomerate Cosan SA, had issued a joint statement on Monday saying that the merged entity of Shell and Cosan had agreed to a cash-and-stock takeover of the debt-laden Dutch merchant Louis Dreyfus Co’s sugar and ethanol unit Biosev, stepping up Raizen’s stance as the world’s largest sugar maker while strengthening its footprints in LATAM energy market.

On top of that, according to the terms of the deal, Raizen would lay off a stark upsum of $670 million to Biosev shareholders, while the shareholders would also shelve a 3.5 per cent of Raizen’s preferred shares alongside a 1.49 per cent of its redeemable shares, a regulatory filing had revealed.

Nonetheless, the energy giants had declined to disclose the price tag which they had agreed to an acquisition of Biosev.

Raizen to purchase Louis Dreyfus Co’s sugar and ethanol unit

In factuality, latest move from Shell-Cosan merger to an acquisition of Biosev came forth just days after Shell had reported its steepest annual plunge in profits in more than two-decades, which in turn could vindicate the Anglo-Dutch fossil-fuel Supermajor’s attempt to bolster its stature in global sugar market at a time when sugar prices had been hovering near their highest level in more than four years, suggested analysts.

Apart from that, in the day’s joint statement from Shell and Cosan SA had also added that their merged entity, Raizen, would have 35 mills in Brazil with sugar crane crushing capacity of 105 million tons per year or nearly a 17 per cent of Brazil’s entire centre-south harvests in the latest fiscal year following a completion of the takeover deal.

In tandem, although Raizen had yet to disclose the full purchase price of Biosev, Louis Dreyfus said in a statement that an approximated $800 million which it would receive through the proceedings would be capitalized on reimbursing a $1 billion in debts what it had almost entirely been forced to digest during a previous bailout of Biosev.

Meanwhile, referring to Biosev’s mass-scale output capacity, Raizen Chief Executive Ricardo Mussa said to the reporters following the announcement, “It was a great opportunity. Biosev has good plants; they have a good operation.

The problem there was financial, not operational. Biosev has a larger flexibility to shift production from sugar to ethanol. It will fit well into our strategy to expand ethanol production.