Deal for sale was closed between Mubadala and company’s creditor banks
12/14/2022
The sugar-and-ethanol company Atvos was valued at R$1.6 billion in the agreement closed between Abu Dhabi sovereign wealth fund Mubadala and the creditor banks of the company for its sale, sources say. The transaction, settled in defiance of the current controlling shareholder, the U.S.-based fund Lone Star, is equivalent to a multiple close to that of sales of mills in financial distress – of just over R$40 per tonne of installed cane capacity, or R$68 per tonne of processed cane.
The deal does not involve cash payment, but a debt restructuring and a commitment from Mubadala to contribute R$500 million as equity. Mubadala will in practice have a stake of 31.5% in Atvos, while the banks will hold 60%. Under the agreement, the banks, which have warrants equivalent to 90% of Atvos, will cede the bonds to Mubadala, and, in return, new bonds will be issued with the fund.
There would also be the entry of the Agroenergia FIP Multiestratégia fund, of partners Ricardo Knoepfelmacher and Giovanni Forace, from RK Partners – former advisor to Odebrecht in the case. With this, Lone Star and Novonor (former Odebrecht) would share the remaining stake.
Atvos has been valued at very different amounts. When the company was still a subsidiary that Odebrecht wanted to sell, before seeking protection from creditors, the group sustained that the business was worth between R$6 billion and R$13 billion.
When the company was already under judicial reorganization, Lone Star, one of the most aggressive creditors in the negotiations, agreed to pay $5 million to take over the company from the Natixis bank, which held the right to exercise control as collateral on behalf of Odebrecht’s creditor banks.
Lone Star is expected to question the deal in court. The fund is expected to argue that it is investing in Atvos and that there would be no need for contributions. In this harvest, crushing reached 22.3 million tonnes, compared to 27 million tonnes three years ago, but capex increased from R$400 million in 2020/21 to R$1.1 billion this crop. A good part of this increase was used to double the sugarcane planting area to 90,000 hectares by the end of this harvest. The cash generated jumped to R$1.2 billion in the current harvest from R$200 million in 2020/21.
The U.S.-based fund expected the company to be worth four times what was negotiated with Mubadala, with a multiple close to $40 per milled tonne, or almost R$5 billion in total.
The Arab fund understands that there is still a high debt, of R$7 billion, and a need, for the next three years, of R$1.5 billion more in capex than what is currently used to reduce the age of the cane fields and expand the planting area, which would raise the value of the company (including debts) to almost R$10 billion.
In a note, Lone Star said the Mubadala deal “ignores the significant operational and financial turnaround,” and that it was closed “without a competitive process and without consultation with management team,” nor was there “due process or due diligence.” Mubadala declined to comment.
*By Camila Souza Ramos — São Paulo