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.