ALL Jumps Most Since 2008 on Talks With Cosan: Sao Paulo Mover

ALL-America Latina Logistica SA, Brazil’s largest railroad operator, jumped the most since 2008 after it said merger talks were advancing with Rumo Logistica SA, a unit of sugar producer Cosan SA Industria & Comercio.

Curitiba, Brazil-based ALL and Cosan said in separate regulatory filings today that while the talks had advanced in the past few days, there is no agreement yet. The newspaper Valor Economico reported today that the two companies are close to ending a dispute over sugar transportation contracts and that a merger agreement may be concluded as soon as next week.

ALL surged 19 percent to 6.45 reais at the close of trading in Sao Paulo on volume six times the three-month daily average. The gain was the biggest on Brazil’s benchmark Ibovespa gauge, which increased 0.8 percent. The shares tumbled 21 percent last year amid investor speculation that the dispute with Rumo would lead to a large fine.

“It’s an imbroglio that was developing through 2013, and the shares were punished for it,” Renato Hallgren, an analyst at BB Investimentos in Sao Paulo, said by phone. “Maybe the merger with Rumo is the best outcome.”

Sao Paulo-based Cosan, which runs the world’s largest sugar-cane processor in a joint venture with Royal Dutch Shell Plc, gained 5 percent to 36.47 reais.

ALL Partnership

Cosan, which signed a partnership with ALL in 2009, abandoned a plan in August to buy a 5.67 percent stake in the company, saying negotiations “ended without the transaction coming to fruition.” Rumo is Cosan’s logistics company, transporting sugar by rail from growing regions to the Port of Santos, where it operates the world’s biggest export terminal and warehouses, according to the company’s website.

While Rumo has said it delivered on a pledge to invest about 1 billion reais ($419 million) to increase rail capacity in a partnership to carry sugar to the Port of Santos, 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.

“The merger would be good for both companies,” Lenon Borges, an analyst at brokerage Ativa Corretora, said by phone from Rio de Janeiro. “It saves time, money, and opens an opportunity for cost cutting ahead, with the integration of operations. But the stock should be volatile until they actually announce the deal.”

ALL’s valuation reached 9.57 times estimated earnings for the next 12 months yesterday, the lowest in at least five years.

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