Dreyfus takes over Brazil's Santelisa, plans IPO

Local unit Louis Dreyfus Commodities Bioenergia and Santelisa Vale said the new venture, called LDC-SEV, will control 13 sugar and ethanol plants and have annual cane crushing capacity of 40 million tonnes, second only to Brazil's Cosan.

Louis Dreyfus and a group of financial partners pledged 800 million reais ($460.6 million) to the venture, the French group said, adding that it will also assume an undisclosed amount of debt.

Dreyfus will hold a 60 percent stake, Santelisa Vale shareholders will have 18 percent, third party investors 9 percent and the remaining 13 percent will be in the hands of banks Goldman Sachs and Brazil's state-run development bank BNDES, LDC-SEV Chief Executive Bruno Melcher said.

He said the estimated value of LDC-SEV is 8 billion reais and combining operations should bring annual savings of 100 million reais.

"Brazil has currently 40 percent of the global sugar market and this should increase in the coming years. Also, local demand for ethanol will grow and the potential for (ethanol) exports is huge," Melcher said at a press conference.

In order to meet growing sugar and ethanol demand, local cane output in Brazil must be increased by 30 million tonnes per year, he added.

"That's why new projects are essential," he said, adding that future investments would initially go to raise mills' capacity of cogeneration of electric energy through burning of cane bagasse and leftovers.

Investments to boost sugar and ethanol production capacity would come later. The company doesn't rule out building new mills from scratch, Melcher said, adding that potential areas have already been identified in the country.

IPO PLANS

LDC-SEV may also end its participation in Tropical Bioenergia, a biofuels joint venture it entered in 2008 with British oil major BP Plc and local grain and oilseed producer Maeda, Melcher said.

The company plans to take on new financial backers as well, some of which could be development banks from other countries and other investors.

The companies said they plan an initial public offering for the venture to fund future expansion, which could be held in three to five years, or sooner, depending on market conditions.

"LDC-SEV plan to have an IPO in the near future in a bid to guarantee access to the capital necessary to sustain its ambition to keep a leading role in growth and consolidation in Brazil's sugar and ethanol sector," the companies said in a statement. "LDC-SEV's expansion plan is aggressive."

Brazil's cane sector has been through strong consolidation. It leveraged its expansion in recent years, as local demand for ethanol grew and exports of the biofuel were seen rising, and then was hit hard by the intensification of the global credit crisis.

Santelisa Vale was created in 2007 through a merger between two traditional cane groups, Vale do Rosario and Santa Elisa.

Melcher said LDC-SEV will keep Santelisa's 73-percent share in Brazilian sugar and ethanol marketing firm Crystalsev.

($1=1.737 reais)

(Writing by Elzio Barreto; Editing by John Picinich, Walter Bagley and David Gregorio)