Cosan makes a proposal for purchase 5.6% of ALL’s capital

Cosan announced Tuesday (21) night the negotiation for purchasing 38,980,117 shares from ALL, which corresponds to 5.6% of the Company’s total capital. From this share’s amount, 34 million are documents tied to the shareholder’s agreement, which means that the group has vote rights. This represents 49% of the shareholders’ group that keeps a vote agreement with each other for participating together of strategic decisions by means of the Company’s board.

The shares purchase proposal was made between the shareholder Riccardo Arduini, counselor of the Company, his wife Julia Dora Koranyi Arduini, and GMI (Global Market Investments L.P., representing the management board chairman of ALL, Wilson de Lara. The operation amount is US$527.542 million (R$ 896.542 million). Cosan does not intend to issue shares to conclude this investment. The Company shall count on proper resources and shall rely on investors.

The negotiation is subject to approval of the other partners from ALL’s large-block shareholder, which shall vote in the next weeks the new share ownership breakdown. Cosan is proposing to pay a huge amount to be part of the Company’s large-block shareholder – about US$13.53 (R$ 23) per share – or a reward above US$235.43 million (R$ 400 million).

The operation shall also be approved by the National Land Transport Agency (ANTT – Agência Nacional de Transportes Terrestres) and by the Board of Directors for Economic Defense (Cade – Conselho Administrativo de Defesa Econômica). “We have seen the great value of this business. We have a long-term strategy. The [rail] industry is going through a regulatory change, and the country is living a moment of strong investments in infrastructure,” says Marcos Lutz, CEO of Grupo Cosan.

Cosan shall request some seats in the Company’s Board of Directors, and its representatives must to have a say regarding the new steps the Company is taking. Lutz confirmed that the group is not interested in having the majority control of the logistics concessionary.

But negotiations between the two companies can only move forward under the blessing of the other shareholders from the large-block shareholder, among them, pension funds like Previ (fund of employees of Banco do Brasil), Funcef (Federal Savings Foundation – Fundação dos Economiários Federais), besides the participation of BNDES (Brazilian Development Bank – Banco Nacional de Desenvolvimento Econômico e Social). That happens because of an agreement made with ALL’s controllers, in which the clauses that foresee the preference right are in force, besides the blocking of share sales for a specified period of time because of another lock-up clause, introduced in the last change of this agreement that expires in 2017.

According to sources familiar to Company’s pension funds, it is pointless to private partners sell their shares of a Company that they do not control by themselves, once they are all together bonded by the agreement. The speakers heard by Valor think that, even if there is a shareholder interested, ALL will only have a new partner if they talk to the other quarterbacks, both the party who wants to sell and the party who wants to buy – which has not happened up to now.

The deal between Cosan and the shareholders that was negotiating the sale of its part in the business has a term of four years and it warrants exclusiveness, affirmed Lutz. However, he expects that the approval is defined in a few weeks or even in a few months. “We do not have a plan B [in case of rejection],” he said. “The Company was interested in being a part of the group since always. The Company had already tried, without success, to negotiate the purchase of ALL’s shares from former shareholders.”

“We all expect that the business is carried on. We have agribusiness in our DNA, as well as ALL has. This partnership shall benefit the society,“ said Rubens Ometto Silveira Mello, chairman of the Board of Directors of Cosan, to Valor, stressing that Brazil is strongly investing in infrastructure.

The admittance of Grupo Cosan in the large-block shareholders of ALL Logística shall leverage the expansion of the railway Company. Valor investigated and discovered that the Company shall receive an injection of resources to promote its growth if the transition is approved by the remaining partners of the group. Port areas and the railway network shall receive massive contributions with the arrival of the new partner.

The admittance of a new strategic partner in ALL like Cosan was well-received by the Government, which was aware of this operation, according to sources heard by Valor. Cosan is seen as a strong partner, whose investment focus is concentrated on infrastructure. ALL is in a restructure process since 2010 by means of its business diversification. Cosan’s admittance in ALL can re-position the group, leveraging future investments, confirmed a source connected to the Logistics Company.

ALL’s concession date is valid up to February 2027, and it can be extended up to 30 years. Debates between the Government and the Company for this extension cannot be done before this period.

According to Lutz, the Company wants to erase its image as a Commodities Company towards becoming a group focused on infrastructure.

Since the beginning of 2010, when Cosan announced a joint-venture with Shell to create Raízen, one of the biggest fuel distributors of Brazil, including sugar and alcohol assets of the group, the marketing was asking which would be the strategic future of Cosan. Under the Company’s protection were Rumo, logistics branch; Radar, Company of rural lands, and Cosan Alimentos, which negotiates the brand products of the group.

Yesterday, during a conference with market analysts, Lutz confirmed that Rumo, which has a contract with ALL for VHP (Very High Polarization) sugar transportation and port infrastructure, shall not clash with the interest of the logistics Company. “We see peacefully the business relationship established by the contract. We are going to follow all market rules,” he said.

In the last months, according to analysts, ALL had failed to comply with deadlines established with Rumo. Valor investigated and discovered that Rumo might pass for realignment in the future due to the fact that the business nature of both companies is alike.

The aggressive strategy for expanding Rubens Ometto Silveira Mello’s business brought strong criticism to the manager, especially from minority shareholders. “The investor must believe in the [expansion] strategy of Cosan. The businessman was able to lead the expansion process of the Company, which was aimed to [sugar and alcohol] agriculture, expanded the Company’s capital and transformed the group in a Logistics Company,” said a source familiar with the business. The critics see the current picture, but they do not know how the business is going to be in the future.

Rubens Ometto transformed Grupo Cosan, founded in the 1980’s, in a sugar and alcohol authority in the 1990’s. His family, of Italian origin, arrived in Brazil by the end of the 18th century. In 2005, the Company opened the capital in Brazil and after two years, its shares started to be negotiated at New York Stock Exchange. By diversifying the business, Cosan also participates of a billionaire project together with Petrobras in Logum for the construction of an ethanol duct. The Company also invests strongly in co-generation of energy from sugar cane.

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