Cargill’s Black River in Talks to Buy Ruette Brazil Sugar Mills

Updated on
  • Plants have capacity to crush 3.7 million tons of sugar-cane
  • Company's interest occurs as sugar price prospects improve

Black River Asset Management LLC, the $7.4 billion investment firm owned by Cargill Inc., is in advanced talks to buy sugar-cane mills from Antonio Ruette Agroindustrial Ltd, a defaulted Brazilian company, signaling a resumption of deals in the country’s troubled sugar and ethanol industry amid prospects of rising prices for the sweetener.

Black River may pay about 680 million reais ($176 million) for the two plants, including 530 million reais of debt, local financial newspaper Valor Economico said earlier, citing people with direct knowledge of the deal.

Cargill’s press office in Sao Paulo confirmed the talks while declining to comment on specifics until the process is completed. Regina Ruette Aspasio, a member of family that controls Brazil’s company, also confirmed negotiations without elaborating on the value or the structure of the deal.

Cargill’s interest in expanding its sugar capacity in Brazil coincides with the prospect of prices recovering from its longest slump since at least 1962 as the global market heads into its first supply shortfall in five years. Also, domestic mills are seen benefiting from Brazilian real’s slump as it makes their exports more competitive. The real, which has slumped 32 percent this year amid the worst recession in 25 years, led world losses Thursday.

The U.S’s largest closely held company operates three Brazil sugar-cane mills through joint ventures with a total crushing capacity of 10.5 million metric tons, according to the company’s website. Ruette’s mills, which are in the main producing state of Sao Paulo, can process as much as 3.7 million tons of cane.

Rising Prices

About 50 mills in the nation have been shuttered since 2011 amid rising inventories, Brazil industry group Unica said in a May report. Now, production is seen faltering demand by 2.5 million tons in 2015-16 and 6.2 million tons in the 2016-17, signaling higher prices, International Sugar Organization said last month.

In July, Black River said it’s liquidating four hedge funds with more than $1 billion in combined assets. The firm is closing funds that invest in equities, emerging markets, commodities, as well as a fund that focuses on Europe, Middle East and Africa.