The acquisition of a 50.8% share of Brazil’s Equipav sugar and ethanol group by India’s largest sugar refiners, Shree Renuka Sugars (SRSL), follows a dominant trend in the Brazilian sugar and ethanol industry in recent years, which picked up speed in 2010. That’s the assessment of the Brazilian Sugarcane Industry Association (UNICA) about the deal – the fourth major transaction in the sugar-ethanol industry announced so far this year and the third involving the presence of foreign investors in a dominant position.
"The sugarcane industry has been experiencing an intensification in transactions like these, as a number of favorable factors involving Brazilian sugarcane ethanol converge and naturally attract a growing number of foreign investors. The trend increasingly shows that observers are more and more convinced about the sustainability of our industry and the success of Brazil’s strategy to replace fossil fuels with renewable,” says the President of UNICA, Marcos Jank.
Prior to the Equipav transaction, other deals announced since January include: the Shell-Cosan joint venture, Bunge’s acquisition of the Moema Group and the ETH-Brenco merger into a single company, to be called ETH Bioenergy. The Equipav deal means R$ 600 million (over US$ 300 million) in investments in sugar and ethanol production will be injected into the group’s two mills, located in cities of Promissão and Brejo Alegre, in São Paulo state. In November of 2009, SRSL completed its first investment in Brazil, acquiring 100% control of the Vale do Ivaí mill, in the state of Parana.
SRSL began its operations in 1999 and its assets include eight sugar mills, three distilleries, 173MW cogeneration installations and two refineries. For its part, the Equipav Group is a stakeholder in more than 20 companies from an array of sectors, such as road concessions, bus stations, sanitation, electric power cogeneration, cement production, waste management and conservation. The Group operates in the sugar and ethanol sector since 1980.
According to SRLS president Narendra Murkumbi, investing in Equipav brings his company closer to establishing a global sugar and ethanol business: "We are joining the best production cost with economies of scale, with a prominent presence in the largest markets for sugar and ethanol in the world."
Considering all the acquisitions made in 2010, the percentage of the Brazilian sugar and ethanol sector controlled by foreign capital has now reached the 22% mark. That percentage remains well below foreign ownership levels in numerous other segments of the Brazilian economy, including agribusiness.