Sugar and ethanol producer, Cosan Limited (CZZ) revised down its offering to R$90.0 million from R$142 million offered earlier for acquiring equity interests of its rival sugarcane producer, Usina Zanin Açúcar e Álcool Ltda. (Zanin).
This revision was brought about by adjustments in working capital and deduction of liabilities and contingencies. In addition to the transaction value agreed upon, Cosan will also assume debt amounting to R$240 million. Cosan intends to use available cash to fund the transaction.
Through the acquisition Cosan will gain access to Zanin’s industrial and agricultural operations and a greenfield project in the city of Prata, State of Minas Gerais. Zanin, based in the Araraquara region, currently has 2.6 million tons of sugarcane crushing capacity.
Cosan is the largest sugar and ethanol producer in Brazil and ranks third in sugar and fifth in ethanol production in the world. Apart from its core operations, the company is also engaged in energy production from sugarcane bagasse.
Fuel distribution is another of Cosan’s businesses with the company aiming at becoming the third largest distributor in Brazil after the consummation of the recently announced joint venture with Shell International Petroleum Company Limited.
Cosan, over time, has been growing through acquisitions and other expansion strategies. The company evidently is well positioned to benefit from the acquisition of Zanin by gaining operational and logistics synergies.
Besides expectations of growing sugar and ethanol businesses, energy co-generation business is also expected to get a boost from an increase in installed capacity with the addition of 6 new projects by 2012. Annual capacity is expected to surge to 1,213 MW.
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