06 May 2014 17:37 [Source: ICIS news]
HOUSTON (ICIS)--Brazil’s Sao Martinho, one of the country’s biggest sugar cane and ethanol producers, has signed a memorandum of understanding that will allow it to take control of smaller rival, Santa Cruz SA Acucar e Alcool, Sao Martinho said on Tuesday in a filing with the Sao Paulo stock exchange.
“It is estimated that the combination of the assets of Santa Cruz and Sao Martinho will be equivalent to about 15m tonnes of sugar cane in a 200,000-hectare area with high interaction as both plants are only 45km distant,” Sao Martinho said.
Sao Martinho agreed to pay the equivalent of some $141m over a 10-year period for a 56% share participation in the company and also entered parallel accords to transfer the equivalent of another $87m in capital also over 10 years.
Santa Cruz alone has capacity to harvest/crush 4.5m tonnes of sugar cane and has it own its power generation facilities. Sao Martinho’s output in recent years has represented about 2% of the ethanol produced in Brazil and 2.8% of the country’s total sugar production, the company said.
Sao Martinho had first bought a 32% minority stake in Santa Cruz on October 2011.
The transaction comes as industry associations have said ethanol producers are currently financially challenged because of what they describe as unfair government policies to subsidise rival fuel gasoline, which aim at controlling inflation but which also hurt ethanol producers. As a result, there is some consolidation in the industry.
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