Cosan SA Industria & Comercio, which runs the world’s largest sugar-cane processor with Royal Dutch Shell Plc (RDSA), agreed to buy BG Group Plc’s (BG/) stake in a Brazilian natural-gas unit for $1.8 billion as it expands in fuel supply.
The two companies signed an accord for the purchase of BG’s 60.1 percent stake in Cia. de Gas de Sao Paulo, known as Comgas, and expect to complete the deal by the end of this year, Reading, England-based BG said in a statement today. The acquisition hinges on approval from Comgas shareholders, Sao Paulo-based Cosan said in a separate statement.
“The deal is in line with Cosan’s plan to diversify away from the volatile, hard-to-anticipate swings in sugar and ethanol prices,” Erick Scott Hood, an analyst with SLW Corretora who rates the stock buy, said in a telephone interview from Sao Paulo. “Although the acquisition doesn’t bring immediate synergies, it’s positive in the long term.”
Brazilian billionaire Rubens Ometto, the founder and chairman of Cosan, has sought to expand from sugar cane-based ethanol to fossil fuels since the company’s purchase of Exxon Mobil Corp. (XOM:US)’s distribution assets in Brazil for $826 million in 2008. Cosan has since derived most of its sales from fuel and lubricant distribution.
The acquisition of BG’s stake in Comgas, if approved, will be Cosan’s largest since its initial public offering in 2005, according to data compiled by Bloomberg.
Comgas is Brazil’s largest gas distribution company. Shell, which jointly controls ethanol producer and fuel distributor Raizen with Cosan, holds an 18.1 percent stake in Comgas, BG said.
BG is seeking to raise $5 billion through asset sales to focus on investments in oil and gas fields in Brazil, the North Sea and Australia.
“We look forward to concluding this deal as part of our plans to release some $5 billion of capital in the next two years through strategic divestments,” BG Chief Executive Officer Frank Chapman said in the statement.
In March, Cosan agreed to pay $100 million for Exxon’s Comma Oil and Chemicals in the U.K. In October, it acquired Exxon’s lubricant distribution assets in Bolivia, Paraguay and Uruguay for an undisclosed amount.
Cosan rose 0.7 percent to 33.06 reais at 2:23 p.m. in Sao Paulo. It’s up 22 percent this year, more than the 9 percent increase in the benchmark Bovespa index.
Ometto is the world’s largest sugar-cane grower.
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