The tycoon who built the world’s biggest sugar-cane operation by buying mills in Brazil is about to dominate rail freight transport in the country.
Cosan, the sugar maker controlled by billionaire Rubens Ometto, won approval from ALL-America Latina Logistica SA controlling shareholders to buy the train operator for about $3 billion in an all-stock deal, ALL-Logistica said in a filing yesterday. Shares gained as much as 5.6 percent today.
The blessing from holdouts including pension fund Previ opens the way for Cosan to take over a rail network connecting Brazil’s two largest ports to areas that produce most of the world’s sugar and soybean exports. The deal culminates Ometto’s three-year battle to gain control over routes that face increasing bottlenecks to ship record crops.
“The deal allows Rubens Ometto to expand Cosan’s participation in logistics, which was his big goal,” Pedro Galdi, chief equity analyst at brokerage SLW Corretora in Sao Paulo, said by phone. “The merger will bring synergy gains to ALL.”
The combination “has enormous potential to contribute to the development of the country’s infrastructure,” Cosan Chief Executive Officer Marcos Lutz said in an e-mailed statement. “Our goal is to create value with investments and management.”
The tie-up probably will generate savings of 3.36 billion reais, newspaper Valor Economico reported today, without saying where it got the information.
Previ, which rejected a Cosan offer to buy a stake in ALL in 2012, is part of the group that approved the 6.96 billion-real ($3.1 billion) takeover offer valuing ALL’s shares at 10.184 reais each. That’s a 56 percent premium over the Feb. 21 close before the bid was announced on Feb. 24. The premium had narrowed to 26 percent yesterday.
Shares rose 3 percent to 8.34 reais at 12:38 p.m. in Sao Paulo after reaching 8.55 reais.
The proposal will be submitted to ALL minority shareholders within 30 days. The agreement is subject to approval by Brazil’s land transport regulator, known as ANTT, and antitrust regulator, known as Cade.
Under Cosan’s proposal unveiled in February, ALL will merge with Cosan’s logistics unit Rumo. Shareholders of Rumo will hold a 36.5 percent stake in the new company and name most board members, while ALL’s shareholders will own 63.5 percent.
The resulting company, which will be listed in Sao Paulo, is poised to invest in transport projects as Brazil plans to auction ports and 10,000 kilometers (6,200 miles) of railroads to boost economic growth.
ALL operates about 13,000 kilometers of rail lines, or almost half of the 29,000 kilometers in Brazil, the world’s top sugar and soybeans exporter.
ALL’s network is crucial for the country’s booming farm industry as it connects the largest soybean-producing state of Mato Grosso to the ports of Santos and Paranagua through Sao Paulo state, where most of the country’s sugar is produced.
Rumo’s assets include six warehouses linked to ALL’s network and the largest sugar port terminals in Santos, with the capacity to handle 18 million metric tons a year.
The group of ALL shareholder that approved the deal is formed by private holders Julia Dora Arduini, her husband Riccardo Arduini and Wilson de Lara, with a combined 53 percent of controlling shares. Brazil’s state development bank BNDES has 16.6 percent. Pension funds Previ and Funcef, along with BRZ Investimentos, hold a combined 30.3 percent.
The proposal received mixed reactions in Brazil’s commodities industry. While Abiove, a soybean processors group, expressed concern that the deal could be harmful for the transportation of crops as it concentrates power in the hands of an important user of ALL lines, companies including Vanguarda Agro SA said the merger will allow for investments in railroads to increase at a faster pace.