Noble expands Brazil cane ops with $950 million deal

By Nopporn Wong-Anan and Inae Riveras

SINGAPORE/SAO PAULO (BestGrowthStock) – Noble Group, Asia’s biggest commodities trader, said on Monday it would pay $950 million for two Brazilian cane mills, raising its crushing capacity by 84 percent in the world’s largest sugar exporter.

The Singapore-listed company already has two mills in Brazil, where it operates as a major sugar trader. The construction of one of them has just been completed.

Noble (NOBG.SI: ) and other agribusiness giants including Bunge (BG.N: ), Cargill and, more recently, Glencore (GLEN.UL: ) have made the jump from sugar trading to physical production, eyeing bright long-term prospects for the sector.

“The acquisition of Cerradinho will propel the group into the top tier of sugar cane milling companies globally, taking the combined annual potential crushing capacity that Noble will control to 17.5 million tones,” the firm said in a statement.

The two mills, which are being purchased from Brazilian sugar and ethanol group Cerradinho, are located in Sao Paulo state, which accounts for 60 percent of Brazil’s cane crop.

Catanduva has a nominal annual cane crushing capacity of 4.6 million tones while Potirendaba crushes 3.4 million tones per year. The two mills will have combined production of up to 600,000 tones of sugar, 300,000 cubic meters of ethanol and supply over 300,000 megawatt hours of electricity to the grid.

Catanduva also has a sugar refinery.

“The physical proximity of the four mills that Noble will own after this acquisition offers significant economies of scale,” the company said.

CONSOLIDATION

Family-owned Cerradinho was seeking a minority shareholder as part of a broader corporate restructuring. In November, BP (BP.L: ) bid for a stake in the group, but the deal was rejected, and talks with Noble and other firms resumed.

The transaction will leave the Brazilian group in possession of only a single mill.

Brazil’s sugar and ethanol industry has been through a wave of consolidation in the last two years, in which big firms bought out smaller ones drowning in debt. Many had borrowed heavily prior to 2008 in a period of euphoria about the sector’s prospects but struggled during the credit crunch.

The situation left a handful of distressed players that had previously been considered overvalued, and larger companies with more cash snapped up some of the mills no longer able to carry out their ambitious expansion plans.

Earlier this month, Swiss-based commodities trader Glencore bought a stake in Brazilian mill Rio Vermelho, its first investment in the cane sector.

Noble also operates grain-crushing facilities, coal and iron ore mines, fuel terminals and storage facilities, vessels and ports. In Brazil, it has a coffee-processing plant in Minas Gerais state and warehouses, besides port terminals.

(Editing by Dale Hudson)

Noble expands Brazil cane ops with $950 million deal