Louis Dreyfus big stake acquisition of Santelisa Vale

08/04/09 - Santelisa Vale, a company formed in 2007 after the merger of the Santa Elisa and Vale do Rosario sugar and ethanol companies, has just sold a significant stake to Louis Dreyfus Commodities Bioenergia S.A. The exact numbers have not been disclosed.Before the deal with Louis Dreyfus was approved on Monday, April 6th, a host of other contenders, including Sao Martinho and Bunge, had attempted to woo Santelisa Vale. At the time, offers for a 40% stake were estimated by the local business media at BRL 3 billion, or USD 1.4 billion.Together, the two companies will have a combined yearly processing capacity of 40 million tonnes of sugarcane – more than the entire Australian output in the 2007-2008 harvest year, a paltry 36 million tonnes. In milling capacity, Santelisa Vale-Louis Dreyfus are also just a step behind Cosan, the world’s largest producer of sugar and ethanol, which milled 40.3 million tonnes in the 2007-2008 season, producing 3.24 million tonnes of sugar and 1.52 billion liters (400,000 gallons) of ethanol (see MD&A, p. 4, in Form 20-F here). One tonne of sugarcane yields, on average, 80 liters, or 21.16 gallons, of ethanol.Santelisa Vale is choking on the debt it took on in March 2007 to finance its acquisition of Nossa Senhora do Vale do Rosario. At the time, the owners of Santa Elisa, the Biagi family, offered Santa Elisa itself as collateral and took on USD 675 million in debt from Bradesco – until recently, Brazil’s largest private bank. Now they are struggling with a debt load of BRL 3 billion, or USD 1.4 billion.With the acquisition of a stake in Santelisa Vale, Louis Dreyfus is extending its shopping spree in Brazil. In February 2007, the company doubled its local milling capacity when it acquired four mills belonging to the Tavares de Melo Group. At Santelisa Vale, Louis Dreyfus joins a coterie of investors and partners that includes Goldman Sachs, Global Foods, Carlyle/Riverstone, and Discovery Capital.Other European players are also significantly expanding their production and trading operations in Brazil. Sucden, Tate and Lyle, Czarnikow, and Tereos, which owns Acucar Guarani, are all busy helping their respective countries in Europe kick the sugar beet subsidy habit.