12/30/2008 10h26
Crisis makes purchase of plants difficult, but mergers are to keep high
Valor Econômico 12/30/2008
The mergers and acquisitions movement should continue intense in the sugar and alcohol sector in the next years, but in 2009 the rhythm of the businesses tends to be slower because of the global financial crisis. Even the most capitalized plants will be more cautious, analyzing each step before making expansion movements. The situation will be more favorable to mergers than to acquisitions, according to analysts heard by Valor. "The movement of concentration should take place all over 2009, but it will not be as strong as before", affirmed Luiz Gustavo Torrano Corrêa, a partner of F&G Agro, an agribusiness financial consulting and management firm headquartered in Ribeirão Preto (SP), to Valor. In 2008, the mergers and acquisitions in the sector amounted to 14 operations in the year until December 17, compared to 25 deals made in 2007, according a survey made by the KPMG consulting firm. The trend is that 2009's operations should repeat or exceed a little 2008's performance. The boom of investments in 2007 was not repeated in 2008 because of the global financial crisis. Big groups of the sector, such as Cosan, Louis Dreyfus, and the Odebrecht ETH affirmed they will be strong consolidators in the next months, as the crisis generates business opportunities. According to Torrano Corrêa, the average-sized plants, without cash problems, will be able to participate in this movement of consolidation, mainly of mergers with companies at a more delicate situation. The movement will only be good for the companies with a consistent history of profitability, expansion potential for "Greenfield" (construction from zero) and "Brownfield" (expansion or acquisition of units in operation) projects. These companies are part of a team of 45 groups that grind between 2 million and 5.8 million tons of sugarcane per harvest. In the country, nearly 15 groups process more than 5.8 million tons of sugar cane. Nearly 100 groups grind less than 2 million tons, according to the consultant.
