Bunge has won the auction for Usina Moema Participacoes, the ethanol and sugar group chaired by tycoon Maurilio Biagi Filho, opening the way for a $1.5bn Brazilian shopping spree.
The US-based commodities giant said it had paid nearly $900m in shares for 100% of Moema, including debt. The deal values Moema's equity at $416m, inferring a value of about $140m for Mr Biagi's 35% stake.
The purchase could pave the way for a further $600m spent buying out Moema's partners in five sugar mills, giving Bunge total control over 15.4m tonnes in annual cane crushing capacity.
Bunge chief executive Alberto Weisser said that the Moema deal would add "significant scale" to its operations in the Brazilian sugar and ethanol sector, which it entered two years ago with the purchase of the Santa Juliana mill, with a then crushing capacity of 1.6m tonnes a year.
Rival bidders
The future of Moema, which has annual revenues reported at Real$1bn, has been the subject of speculation for months, with groups such as US commodities giant Cargill, India's Shree Renuka Sugars and Brazil's Acucar Guarani, Cosan and Sao Martinho also said to be interested in a deal.
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Usina Moema Participacoes...
...owns one cane mill and part of five others, with total crush capacity of 15.4m tonnes a year.
Bunge is paying $896m in shares for the Moema interests, and may pay a further $594m for full ownership of all six mills
Both deals would be paid in shares - 7.3m for Moema and 13.4m for all six mills.
Moema would come with working capital of about $36m. The full deal would come with about $60m |
It had appeared that only a stake in the Moema group of mills was up for sale, with the group aiming to raise cash for its own investments.
Brazil's sugar sector has been the subject of the a wave of consolidation since the falling oil price, coupled with robust sugar prices, squeezed ethanol margins.
The Biagis and the Junqueiras, two of Brazil's oldest sugarcane families, in April sold Santelisa Vale - a sector heavyweight struggling under debts run up paying for acquisitions - to Louis Dreyfus's Brazilian subsidiary.
Bunge shares stood 1.3% higher at $62.78 in midday trade in New York.
Moody's, the rating agency, lowered its outlook on Bunge to negative from stable after the deal, citing concerns about: Bunge's high leverage; its weak financial results this year; the integration risks associated with its expansion in sugar and ethanol; and the increased concentration of the company's operations in Brazil.
Moody's long-term rating on debt Bunge's guaranteed subsidiaries is Baa2, two notches above junk.
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