Raízen, the fuel and energy company controlled by Shell and by Cosan, the conglomerate of businessman Rubens Ometto, completed the sale of its Argentine operations on Tuesday (Sept 1) for US$ 1.42 billion, about R$ 7.3 billion at the current exchange rate. The buyers, Latam Downstream Holdings and Silver Projects, are companies owned by Mercuria, the Swiss energy group, Folha de S.Paulo reports. The sale closes while the company works through an out-of-court debt restructuring known in Brazil as recuperação extrajudicial.
The payment was split between a net cash portion and the assumption of Raízen Argentina's debt by the new owners. The deal closed after the parties met the conditions set in the agreement, including regulatory approvals, according to Times Brasil. The final figure can still change. In a market filing, the company said:
"The price is subject to the usual post-closing adjustments in similar transactions, to be calculated based on the closing financial statements, and the net amount actually received by the Company will be determined after the conclusion of such adjustments."
A R$ 65 billion restructuring
The deal was announced to the market on June 4, one day after creditors began reviewing the final proposal in the restructuring of about R$ 65 billion in debt, about US$ 12.5 billion at current rates, the largest negotiation of its kind in Brazil's history, according to Folha. Under Brazilian law, the extrajudicial recovery lets a company negotiate with creditors and then have a judge confirm the deal. The plan was approved on July 30, with support from 81.6% of creditors.
The debt came from a fast cycle of expansion and investment in new technologies, with failed bets such as the move into retail, Folha reports. Proceeds from the Argentina sale will go to strengthen the capital structure and support the financial restructuring plan, according to Daily Journal.
Down the supply chain, the transaction changes the owner of the Argentine unit, and Raízen keeps its Brazilian assets. The divestment is part of a strategy to review the portfolio and focus on priority markets, Daily Journal reports. For sugarcane suppliers and creditors, the dollars feed the cash that backs the R$ 65 billion agreement. For Brazilian consumers, nothing changes right away: the assets sold sit in the neighboring country, and the direct effect of the change in control lands in Argentina.