Controlling shareholders concluded that bids “were not satisfactory”

02/01/2023

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BP Bunge Bioenergia, valued by the market at around R$9 billion, can process 33 million tonnes of sugarcane per harvest — Foto: Divulgação

The sale of the sugar-and-ethanol joint venture formed by U.S. company Bunge and British oil company BP will be formally called off due to the lack of firm offers, sources say. BP Bunge Bioenergia’s assets attracted interest from Abu Dhabi’s Mubadala fund and Raízen, but the controlling shareholders concluded that the bids were “not satisfactory,” sources close to the talks say.

People familiar with the matter also said that BP intends to hold private talks with its partner Bunge, which owns 50% of the company, to take 100% control of the company. The British oil company also intends to integrate the joint venture into the group’s biofuels division.

BP Bunge Bioenergia, valued by the market at around R$9 billion, can process 33 million tonnes of sugarcane per harvest. Last year, Bunge hired J.P. Morgan to sell its 50% stake in the company. At that time, BP concluded that it could also sell its stake, and the two jointly announced the sale of the entire business.

Mubadala made the best financial offer — but it was still far below what the controlling shareholders wanted. Late last year, the Abu Dhabi fund made progress in negotiations to acquire Atvos, and the deal with Bunge BP cooled, according to sources.

Raízen, a joint venture between Cosan and Shell, was looking at Bunge BP’s mills, but the controlling shareholders wanted cash. Sources familiar with the matter said Raízen preferred to swap shares and give only a portion in cash. Not all of Bunge BP’s mills were of interest to Raízen, according to people familiar with the matter. However, the controlling shareholders did not want to sell the business piecemeal.

The joint venture, which was formed in 2019, has 11 sugar-and-ethanol plants. In the cycle ending in March 2022, the company’s net operating income totaled R$7.2 billion, with a net profit of about R$1.7 billion. The production units are located in Goiás, Mato Grosso do Sul, Minas Gerais, São Paulo, and Tocantins.

This is not the first time Bunge has tried to exit the sugar-and-ethanol business. Before forming the joint venture with BP, the U.S. company, one of the world’s largest in the agribusiness sector, had already hired banks to get rid of its assets in the segment.

Bunge and the France’s Louis Dreyfus, another global agribusiness group, have invested heavily in sugar and ethanol in Brazil in the past, but have not seen the returns they expected.

In early 2021, Raízen closed a deal to buy Biosev, in a negotiation that included an exchange of shares and the payment of R$3.6 billion to refinance the debt of the company, a subsidiary of the giant Louis Dreyfus.

In a block trade, Hédera, a vehicle of Dreyfus, intends to raise R$1.1 billion with the sale of 330 million shares. The funds will be used by LDC to pay off debts to banks. The French have been shareholders in Raízen since the sale of Biosev. The transaction marks LDC’s exit from the business.

The sale of the stake in Raízen reflects LDC’s need to settle payments with banks for past unsuccessful investments. A source recalls that the company has lost a lot of money on ethanol in Brazil since it entered the sector in 2009 with the purchase of the Santaelisa mill.

BP Bunge Bionergia, Bunge, and BP declined to comment.

*By Mônica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/