Brazil’s Sugar King Cleared to Buy Top Commodity Train Operator

Apr 15, 2014 7:25 pm ET

April 15 (Bloomberg) -- The tycoon who built the world’s biggest sugar-cane operation by buying mills in Brazil is about to dominate rail freight transport in the country.

Cosan, the sugar maker controlled by billionaire Rubens Ometto, won unanimous approval from ALL-America Latina Logistica SA controlling shareholders to buy the train operator for about $3 billion in an all-stock deal, ALL-Logistica said in a filing today.

The blessing from holdouts including pension fund Previ opens the way for Cosan to take over a rail network connecting Brazil’s two largest ports to areas that produce most of the world’s sugar and soybean exports. The deal culminates Ometto’s three-year battle to gain control over routes that face increasing bottlenecks to ship record crops.

Previ, which rejected a Cosan offer to buy a stake in ALL in 2012, is part of the group that approved the 6.96 billion- real ($3.1 billion) takeover offer valuing ALL’s shares at 10.184 reais each. That’s a 56 percent premium over the Feb. 21 close before the bid was announced on Feb. 24.

The proposal will be submitted to ALL minority shareholders within 30 days. The agreement is subject to approval by Brazil’s land transport regulator, known as ANTT, and antitrust regulator, known as Cade.

Cosan said in February it plans to merge Brazil’s top train operator into its Rumo logistics unit. Shareholders of Rumo will hold a 36.5 percent stake in the new company and name most board members, while ALL’s shareholder will own 63.5 percent.

The resulting company, which will be listed in Sao Paulo exchange, is poised to invest in transport projects as Brazil plans to auction ports and 10,000 kilometers (6,200 miles) of railroads to boost economic growth.

Rail Network

ALL operates about 13,000 kilometers of rail lines, or almost half of the 29,000 kilometers in Brazil, the world’s top sugar and soybeans exporter.

ALL’s network is crucial for the country’s booming farm industry as it connects the largest soybean-producing state of Mato Grosso to the ports of Santos and Paranagua through Sao Paulo state, where most of the country’s sugar is produced.

Rumo’s assets include six warehouses linked to ALL’s network and the largest sugar port terminals in Santos, with the capacity to handle 18 million metric tons a year.

The group of ALL shareholder that approved the deal is formed by private holders Julia Dora Arduini, her husband Riccardo Arduini and Wilson de Lara, with a combined 53 percent of controlling shares. Brazil’s state development bank BNDES has 16.6 percent. Pension funds Previ and Funcef, along with BRZ Investimentos, hold a combined 30.3 percent.