ALL Surges on Speculation Cosan Talks to Resume: Sao Paulo Mover

ALL - America Latina Logistica SA, Brazil’s largest railroad operator, rallied the most since 2009 after newspaper Valor Economico said the company may restart merger talks with Cosan SA Industria & Comercio.

Cosan Chairman Rubens Ometto and ALL shareholders may resume talks on a merger that may help resolve a dispute over sugar transportation contracts, Valor reported today, without saying how it got the information. Sao Paulo-based Cosan abandoned plans to pay 896.5 million reais ($374.5 million) for a 5.67 percent stake in ALL in August, saying negotiations “ended without the transaction coming to fruition.”

While Cosan’s Rumo Logistica SA unit said it delivered on a pledge to invest about 1 billion reais to increase rail capacity in the partnership to carry sugar to Brazil’s Santos Port, it argues that ALL didn’t give its cargo priority as agreed. ALL is suing to terminate the contract, saying Cosan hasn’t completed a terminal upgrade needed to avoid logjams upon the sugar’s arrival by train.

“It would be positive if ALL settles this dispute in a friendly way because the company would be able to put this issue behind it without having to worry about a penalty fee or any other problem arising from the failed deal,” Marcelo Torto, the head analyst at brokerage Ativa Corretora, said by phone from Rio de Janeiro. “Reaching an agreement to end the dispute is the main positive in the short term.”

ALL surged 8.8 percent to 6.80 reais at the close of trading in Sao Paulo. It was the best performer on the benchmark Ibovespa, which fell 2.5 percent. Cosan, a producer of sugar and ethanol, gained 1.1 percent to 37.30 reais.

Government Meetings

Curitiba, Brazil-based ALL said in a regulatory filing today that while it “constantly evaluates alternative solutions” to the dispute with Rumo, it’s not able to predict their result. Cosan declined to comment when contacted by Bloomberg News.

Newspaper Folha de S. Paulo said this week that Brazil was planning to scrutinize ALL’s compliance with terms in its government contracts and pressure the company to make required infrastructure improvements, without saying how it got the information. ALL said in a Jan. 7 regulatory filing after the market closed that it hadn’t been called on to take part in a Jan. 6 meeting with the government, as Folha reported Dec. 31.

“There have been reports that the government is pressuring ALL, saying they haven’t made necessary investments,” Pedro Galdi, the head strategist at brokerage firm SLW Corretora in Sao Paulo, said in a telephone interview. “If there’s a merger, the bad mood with ALL would be over. That’s what’s pushing the stock higher.”

Cosan’s Ometto met with Transportation Minister Cesar Borges and President Dilma Rousseff yesterday in Brasilia to discuss logistics plans. ALL was not discussed, he told reporters after the meeting.

“The government is calling on companies to talk because they want the private-sector support for their logistics plan,” he said. “Cosan has always invested in logistics.”

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