VCP Lands Aracruz Stake on New Terms

Votorantim is set to become the main shareholder in Aracruz, the region’s largest pulp and paper company, after sealing a BRL2.7bn deal that had been hanging in the balance. Voto’s VCP unit is acquiring a 28% stake in the embattled Aracruz from the Lorentzen family after more than 5 months of delay. The deal announced yesterday was set to close in October, but froze after Aracruz’s announcement of a $1bn loss stemming from FX derivatives. The 28% stake was originally priced at BRL2.7bn ($1.7bn at the time) in cash and the new pact looks to be a fair compromise for both sides. Lorentzen claims it is the BRL price as agreed prior to a near 70% drop in Aracruz’s market cap. Meanwhile, on a dollar basis, Votorantim, achieved close to a 40% discount on an asset whose revenues are more than 90% denominated in USD. The dollar value of the deal is substantially lower thanks to 2 adjustments, says a banker representing Votorantim. First, the stake is being paid for in 6 parcels over a 30-month period without any adjustment for inflation, FX or interest; and second, the BRL has weakened some 23% since end-September. Using 108% of the 15-day CDI rate to calculate the present value in dollars of the BRL2.7bn over the 30 months, the stake today is worth around $1bn – a 40% discount to the original USD price, according to a Voto banker’s calculations. Executives representing the Lorentzen family say the BRL level had to be maintained because the original signed document had no MAC clause and Votorantim was legally bound. “No one could have imagined that [the company] would end up having the problems it did,” says the executive. VCP will now wait to see if the third major investor group in Aracruz, controlled by the Safra family, will exercise its right of first refusal or agree to sell its holding to VCP. VCP is also looking to acquire Safra’s 28% stake in Aracruz. Votorantim is advised by Sao Paulo-based boutique Estater, while Lorentzen was advised by Credit Suisse. JPMorgan is