Crushed by Debt, Ethanol Giant Seeks Sale

SantelisaVale Bioenergia, one of Brazil’s largest sugar and ethanol producers, is exploring a sale of a stake that bankers say could be worth several hundred million dollars. Executives close to the company confirm discussions but decline to provide details, saying nothing has yet been decided. Privately held Santelisa, which came close to filing an IPO last year, is looking to sell a sizable chunk to a strategic or a financial buyer as it buckles under the weight of its debt. It took on BRL1.35bn in March 2007 to finance a buyout by a group of controlling shareholders. In July 2007, Goldman Sachs purchased a 19% stake in Santelisa for BRL400m, valuing the company at the time at some BRL2bn, or $1.1bn, using the exchange rate at the time. “I would say the company is probably worth well over $1bn today,” says a banker with knowledge of the assets, pointing to the company’s 20m ton annual crushing capacity. Last year, SantelisaVale was cited as a leading LatAm crusher, second only to Cosan. According to recently released data from the national industry association UNICA, the upcoming harvest will yield 498m tons, which means Santelisa alone will produce more than 4%. The company has 6 fully operating mills and 2 more set to go online. But falling sugar prices, a slowing economy and closure of the capital and loan markets have put it in a tight spot. Bradesco BBI and Itau BBA are advising Santelisa on its strategic options and will oversee any auction of a stake in the company, or of the entire asset. Bradesco is also Santelisa’s chief lender, providing shareholders with the BRL1.35bn credit line in 2007. Four other banks also make up the lending group.