Shree Renuka Sugars, the country’s largest sugar refiner and ethanol producer, will pay Rs 379 crore, or 24.7 per cent, less than agreed earlier for a 50.34 stake in Brazilian sugar producer Equipav AA.
According to the revised agreement signed between the two companies, Shree Renuka will pay Rs 1,151 crore ($250 million), less than the Rs 1,530 crore agreed in February, for the controlling stake in Equipav.
“It has been successful in concluding a revised agreement to acquire a controlling stake in Equipav,” Shree Renuka said in a filing to the Bombay Stock Exchange. The company was re-negotiating the deal owing to a sharp fall in sugar prices in the global market.
“This values Equipav AA at an enterprise value of $1.147 billion,” the filing said. According to analysts, Shree Renuka Sugars needs a cut in enterprise value of the target company, which was earlier calculated on the basis of high sugar prices in February. Sources in the industry said raw sugar prices had declined substantially from around $700 per tonne in February to $475-500 per tonne.
Equipav has two large modern sugar/ethanol mills, with integrated co-generation facilities, in Sao Paulo state in Southeast Brazil, having a combined cane crushing capacity of 10.5 million tonnes per annum. It has a co-generation capacity of 203 mega watts (Mw).
Shree Renuka plans to expand the combined capacity to 12 million tonnes per annum and the co-generation capacity to 295 Mw at an investment of $121 million.
The investment will fund capital expenditure as mentioned above, partly pay down debt and increase the working capital. The remaining debt will get repaid over a period of 10 years.
Earlier on March 19, Shree Renuka completed the acquisition of Vale Do Ivai SA, a sugar and ethanol production company in Parana state of Brazil. That acquisition included two sugar and ethanol production facilities, with a combined crushing capacity of 3.1 million tonnes per annum.