In the largest cross-border acquisition by an Indian company in the sugar industry, Shree Renuka Sugars has entered into definitive agreements with Grupo Equipav S.A. of Brazil to acquire a 50.8 per cent stake in it for $329 million (Rs.1,530 crore) or Reais 600 million.
The acquisition will significantly multiply the company’s presence in Brazil’s centre-south region and enhance its competitiveness and size. Shree Renuka Sugars’ previous acquisition in November 2009, also in Brazil, was then the largest overseas acquisition by an Indian sugar company: it paid $240 million (Rs.1,110 crore) to acquire 100 per cent of Vale Do Ivai, a sugar/ethanol production company. With two production facilities in the state of Parana, that acquisition helped the company have a cane crushing capacity of 3.1 million tonnes a year and a stake in logistic assets, including storage terminals at the Paranagua port.
Equipav is one of the largest sugar companies in Brazil, having two mills with integrated co-generation facilities in Sao Paolo. It has a cane crushing capacity of 10.5 million tonnes and a co-gen capacity of 203 MW.
The mills are to be expanded to a capacity of 12 million tonnes and 295 MW with a capital expenditure of Reais 218 million. Cane supply comes from 115,000 hectares, of which two-thirds is farmed by the company. Other than debt, Shree Renuka Sugars will part-finance the acquisition through funds raised from a Rs. 500-crore private placement completed in June 2009 and a Rs.185 crore conversion of warrants.
After closing adjustments, it will achieve a majority stake of not less than 50.79 per cent in the company, with the balance being held by Equipav group.
Equipav had a net debt of approximately Reais 1.5 billion as on December 31, 2009 ($822 million, Rs.3,821 crore).
The investment will fund capital expenditure, pay up the debt and increase the working capital. The deal is subject to approvals and is expected to be closed in 40 days.
While Brazil is the largest sugar producer and exporter, India is the largest consumer.
Grupo Equipav is a leading Brazilian conglomerate with equity in more than 20 companies, with presence in sectors as diverse as highway concessions, bus terminals, water and sewage, and electricity generation. It entered the sugar sector in 1980.