Cosan Firms up Jumbo JV with Shell

Cosan says it is in talks with Netherlands-based Shell to form a joint venture it says will be worth a combined $12bn. The deal involves taking Cosan’s core sugar and ethanol and Shell’s Brazilian fuel distribution and sales assets and combining them to create a new entity with 2 separate businesses. One, to be provisionally called A&E, will be focused on sugar and ethanol production while the other, DS, will specialize in distribution. Cosan’s contribution to the company will be worth $4.9bn, plus $2.5bn in debt, while Shell will contribute $1.6bn worth of cash plus distribution assets and a retained payout estimated at $300m over the coming 5 years, according to Cosan. “We view the announcement as a very positive development for Cosan for a few reasons,” says Barclays, saying the move signals a shift in the direction of being a global player. The shop adds that for bondholders, there is the possibility the notes may eventually be guaranteed by Shell in addition to Cosan’s entities. S&P agrees, placing the BB minus rating for Cosan on creditwatch positive. Moody’s, which rates Cosan Ba3, says its negative outlook on the credit remains unaffected by the news. Cosan shares rose 10.7% Monday.