From Alfonsin

Emerging country conglomerates and investment funds are probing sugarcane mills with financial problems in Brazil interested in making any acquisitions. Some of these deals are expected to come out this year, according to sources linked to the talks. The funds assess a short-term incursion in the segment, but there are large groups operating in other sectors that are targeting long-term investments in the scenario of restricted sugar production capacity for the next few years in the world.

Among these conglomerates are the Cevital group, Algeria’s largest private company, and Fatima, one of the largest groups in Pakistan. Amerra, Proterra Investments Partners (which owns one of Cargill’s shareholders), Castlelake and RK Partners are listed on the list of fund managers and consultants who have been collecting information on mills.

Fatima is evaluating the possibility of acquiring the Madhu plant, currently owned by Renuka, and assets of Spain’s Abengoa Bioenergia, which has been seeking to restructure its debt since last year. The Pakistani group – which operates in the sugar-alcohol sector in its country, besides trading in commodities, fertilizers, textiles, mining and energy – already has a close commercial relationship with the Indian company. Wanted, the representative of the group in Brazil declined to comment.

The Madhu plant is expected to undergo a second judicial auction attempt on the 23rd, but so far there have been few inquiries based on information the company has made available about its unit. According to a source linked to Renuka, interested investors are more likely to bid for the entire assets of the Indian company in Brazil after the auction.

With Abengoa Bioenergia, Fatima is under negotiation and is considering the possibility of assumption of debts of the Spanish. Abengoa Bioenergia reported that there have been “information withdrawals from potential investors and buyers”, but “clarifies that so far there is no negotiation completed” and that, for now, continues to focus on grinding 6 million tons Of sugarcane in the next harvest (2017/18).

In turn, the Cevital group has already shown interest in companies in the sector, such as the Usina São Fernando, the family of the businessman José Carlos Bumlai and who is in judicial recovery. The Algerian company owns the world’s largest sugar refinery and operates in several segments of agribusiness, industry and the automotive sector in several countries in Asia and Europe. Wanted, the Cevital representative in Brazil chose not to comment.

This appetite, however, is not unanimous. Cofco Agri, controlled by China’s state-owned Cofco and which already has four plants in São Paulo, even prospected for business last year, including Renuka, but withdrew from the deal. At Valor, Marcelo Andrade, Cofco Agri’s global sugar president, said the company is focused on filling sugarcane capacity with its sugar mills and that current asset sales prices are “out of the question.”

The same mills are also being courted by investment funds. Proterra Investments Partners and Castlelake have already signed a confidentiality agreement to access the database on the Madhu mill, which means they are interested in bidding on the auction, although it is not a guarantee that this will happen.

Proterra already made its first foray into the segment in 2016, when it took over the Ruette Group, after Black River resource manager hit the acquisition in 2015. Castlelake’s entry would be new to the industry. Wanted, Proterra declined to speak, while Castlelake representatives did not return the interview requests.

Brazil’s RK Partners, which has a joint venture with Cerberus Capital Management (one of the largest private equity managers in the world) specializing in distressed assets, contacted representatives of Renuka to evaluate a possible acquisition asset.

Amerra is another fund that since 2016 has indicated interest in acquisition in Brazil. The target is the São Fernando Plant. However, the negotiations have found a barrier since the court of Mato Grosso do Sul (TJ-MS) suspended the assembly of creditors of the plant.

preços dos ativos

From Alfonsin

Harvest of sugarcane in the interior of São Paulo; Lack of raw material supply may limit asset value, analysts say

The interest of new investors in sugarcane mills in the country may lead to an increase in merger and acquisition operations in the sector this year compared to 2016, but the lack of supply of sugar cane, due to the low investment in the last few years Years, may limit the value of transactions.

“There are five or six deals to go out this year,” says Luis Felipe Trindade, director of corporate finance for consulting firm Czarnikow.

The persistence of the financial difficulties of some mills has made its assets “cheap” to potential buyers, especially in the face of a lack of investment to expand world production capacity in a market where demand grows steadily from 1% to 2% % every year.

Last year, the value of traded assets was much lower than in the boom at the beginning of the decade. A study carried out at the request of Valor by consulting firm EXM Partners indicates that the value of the acquisitions closed in 2016 per tonne of sugarcane that the mill is capable of grinding was between R $ 62.70 and R $ 229.40, or US $ 19.10 To US $ 67.90 (see chart above).

Nothing compared to 2010 levels, according to Ângelo Guera Netto, partner of EXM. “That euphoria caused businesses to close at $ 116 per ton. As much as businesses recover now, we will not get back to the same level, “he says. He estimates that the value of upcoming deals could be $ 75 per tonne of installed capacity. According to Netto, the funds, which have short-term vision, are evaluating acquisitions “with a term of exit of about three years, at a price of US $ 85 a ton.

However, there are those in the market who believe that business should not exceed $ 60 a ton, since many mills looking for buyers – even with good milling potential – do not have enough sugar cane to guarantee “satisfactory” Production of sugar and ethanol. In addition, political uncertainties and a lack of credit “should keep asset prices down,” Netto estimates.

Trindade, of Czarnikow, says there is growing pressure for businesses with high financial liabilities to make good on debt. “The typical transaction is to take over debt, which may incur haircut, while capital is more directed to the business itself, in working capital lines.”

Most of the deals last year came from judicial auctions or Petrobras’ decision to exit the segment to focus on oil.

Included in the first case are the acquisitions of the Infinity Bioenergia plants by the US fund managers Amerra and Carval and the purchase of a Unialco unit by the Swiss trading company Glencore. In the case of sales made by Petrobras, there was a sale of the stake in Nova Fronteira to São Martinho and the participation in Guarani to the French company Tereos.

The only business that escaped this tonic was the departure of the American ADM from the plant in Limeira do Oeste (MG). The unit was sold to JFLim Participações, a fund managed by BRL Trust Investments, at an undisclosed amount.


From Jornal Dia a Dia

The Infinity Judicial Recovery Plan, developed by EXM Partners, begins to generate positive results. Usina Nova Naviraí (formerly Infinity Bio Energy) has just announced the hiring of 40 new employees and intends to employ another 220 until the beginning of 2017, aiming at the next harvest, estimated between 800 thousand and one million tons of sugarcane .

“The case of Usinavi clearly demonstrates the importance of the judicial recovery tool in an uncertain economic scenario such as the one we live in. The plant’s indebtedness exceeded R $ 940 million and investors and creditors interested in the business no longer believed in the viability of the project and in the company’s resumption. Our work was instrumental in rescuing the trust and support of the majority of stakeholders, while at the same time structuring a plan focused on maintaining the activity and the positive outcome of all links in the chain, such as creditors, suppliers, The worker, “analyzes Angelo Guerra Netto, founding partner of EXM Partners. “Certainly, these first signs are more positive for society than a decree of bankruptcy of the company,” he adds. Background – In June of this year, control of the Usinavi plant in Naviraí, Mato Grosso do Sul, formerly carried out by the sugar and ethanol company Infinity Bio-Energy, was divided between Amerra, the American investment fund CarVal and other creditors, as Infinity assets divestiture plan, developed by EXM Partners. At the time, the indebtedness of the plant was R $ 943,478 million and the plant had a processing capacity of 3.4 million tons of sugarcane per crop.

EXM Partners is one of the leading consultancies in the country specializing in Turnaround Management and Judicial Recovery. Founded in 2002, it started its operations with a focus on the SME market, which at the time was not well served by the “Big four”. With the entry into force of the new Brazilian Bankruptcy Law in 2005, a new market was opened for Turnaround Management and Debt Restructuring. The company anticipated this opportunity and was a pioneer in this sector.

Since then, the company has developed more than 400 projects in various practices, conducting more than 80 cases of judicial recovery, with 100% of the plans approved by the creditors. This performance consolidated EXM Partners as a national leader in the number of restructuring and judicial reorganization projects, a benchmark among lenders, legal operators and turnaround industry agents in general. Its focus is to enable the best restructuring solutions for the most complex and challenging cases, in order to meet the legal requirements and, at the same time, ensure the continuity of operations and the socio-economic benefits that come from the business activity. Main services: Turnaround and Corporate Restructuring, Judicial Recovery, Debt Restructuring, Performance Improvement, M&A and Valuation, Audit and Taxes.