Raízen plans to seek a buyer for a stake in its fuel distribution business, which will retain the Shell brand, Bloomberg reported Thursday. A formal announcement is expected Friday, following a shareholder meeting to vote on the proposal.
The sale would come after creditors convert debt into an 80% stake in the distribution unit, which is being separated from Raízen’s sugar and ethanol operations, according to Bloomberg.
The proposed split and the search for a strategic partner for the fuel distribution division, Raízen’s most profitable business, were already part of the company’s out-of-court debt restructuring plan. The transaction could involve selling a controlling stake or even the entire distribution business.
Shell will retain a stake of less than 20% in the fuel distribution company following the debt-for-equity swap and will receive rights related to the use of its brand at fuel stations, Bloomberg reported, citing people familiar with the matter.
The restructuring also includes a poison-pill provision requiring any investor whose holding exceeds 25% of the fuel distribution company to make a tender offer for all remaining shares.
Raízen’s current Chief Financial Officer Lorival Luz is expected to become chief executive officer of the fuel distribution business. Sam Aguirre, a senior managing director at FTI Consulting who advised banks during Raízen’s debt restructuring, will be appointed chairman of the unit, according to Bloomberg.
The sugar and ethanol business will be led by Geovane Consul, currently vice president at Raízen Energia. Its shareholder agreement will also include a poison-pill provision, with a lower ownership threshold of 20%.
The separation of Raízen’s businesses and the conversion of debt into equity in the fuel distribution unit had been proposed months earlier during negotiations with creditors over the company’s out-of-court restructuring plan.
BTG Pactual was among those advocating the structure, but the proposal initially faced resistance from Shell, which insisted that discussions over the breakup take place only after the capital injection contemplated in the restructuring plan.
Tax Settlement Clears Key Hurdle
The proposed breakup and search for a new partner come a day after Raízen reached a landmark agreement with Brazil’s federal tax authorities to settle its outstanding federal tax liabilities, removing a major obstacle to its restructuring.
Under the agreement, the company will receive an 85% reduction in the amount owed. Completing the tax negotiations was a critical condition for moving forward with its out-of-court restructuring plan.
Raízen shares fell 9.7% on Thursday on B3, the Brazilian stock exchange, closing at about 5.2 US cents (0.28 real). The company’s market capitalization stood at approximately $599 million (3.2 billion reais).
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
