Biosev, the Brazilian unit of global crop trading giant
Louis Dreyfus Commodities, sold a Brazilian cane operation to rival Sao
Martinho for $95m, fuelling a pre-Christmas deal spree in agriculture.
Biosev is to close the milling operations at its Usina Sao
Carlos, in Sao Paulo province within Brazil's key Centre South sugar production
region, while selling off the associated cane-growing operations and a
warehouse to Sao Martinho for R$199.6m ($95m).
The deal, for Biosev, tidies up an overlap identified on the
group's formation in 2009 through a merger between LDC Bioenergia and Santelisa
Vale, creating the world's second-ranked cane processor, with capacity for handling
Closing the Sao Carlos mill will allow Biosev to focus its
operations in the area on the nearby Santa Elisa plant, which it can then
operate at a higher capacity and so reduce costs.
Louis Dreyfus earlier this year scrapped plans for a Biosev
IPO which would have raised up to $550m. Biosev later turned to banks for $210m
to help ease funding needs it sought to meet through the flotation.
'Mill made viable'
Overcapacity has been identified as a structural weakness in
Brazil's sugar sector, whose prospects have been eroded by weaker sugar prices.
Amaldo Bortoletto, the head of Brazil's largest cane
co-operative Coplacana, in September warned that one-third of mills were at risk of insolvency, or even closure.
Indeed, San Martinho said that the extra 1.85m tonnes of
cane a year that the Sao Carlos purchase would bring was of "absolute importance"
in justifying the purchase, boosting supplies to its own Usina San Martinho
"Ensuring the supply of sugar cane will make viable the mill's
future growth," the group said.
The Sao Carlos cane is located within 30km of the San
Martinho mill, which processed 7.6m tonnes of cane in 2012-13.
String of deals
The deal is the latest of a series announced already this
week in agriculture, including Temasek's purchase of a 20% stake in Indian palm oil-to-poultry group Godrej Agrovet, and Marine Harvest's takeover of salmon processor Morpol.
On Monday, Archer Daniels Midland sealed the sale of a 23% stake
in Mexican food group Gruma for up to $510m, raising cash to fund its proposed $2.9bn
takeover of Australian grain handler GrainCorp.
In the fertilizer sector, Yara International 10 days ago
unveiled the $750m purchase of Bunge's Brazilian fertilizer business.