The biggest acquisition by an Indian company in the sugar space, which was on the verge of turning sour, has finally been clinched.
Shree Renuka Sugars, which earlier this year said it is buying a majority stake in a Brazilian sugar company Equipav S.A. Acucar e Alcool, on Wednesday said it has completed the deal, but under new terms.
Under the revised agreement, the company will invest $250 million (Rs 1,150 crore) to take a controlling stake of 50.34% in Equipav, valuing the Brazilian company at $1.14 billion (Rs 5,244 crore).
In February this year, Shree Renuka said it bought 50.79% in Equipav for Rs 1,530 crore ($329 million). This however, was subject to the approval of an acceptable debt restructuring package by Equipav?s lenders. Equipav has a debt of Rs 3,821 crore ($822 million). However, earlier this month, the company had said the deal will be renogotiated.
With the passage of a new deadline (April 22) for talks between the two firms to finalise the Indian company?s acquisition of Equipav, analysts had said there were signs of one of the largest acquisitions in the sugar space hitting a sweet spot.
The April 22 deadline was one that was set after the earlier 40-day deadline lapsed. With the global sugar industry entering a downcycle, and investors giving a thumbs-down to sugar stocks on the bourses, the deal also ran the risk of falling through, reckoned analysts.
Earlier this month, the company said it is renegotiating the deal. Shree Renuka shares were down 1.09% to close at Rs 68 on the BSE on Wednesday. This is Shree Renuka Sugar’s second major acquisition after it acquired sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool for $82 million in November 2009.
Equipav AA comprises two very large modern sugar plants with integrated co-generation facilities in Sao Paulo. They have a combined cane crushing capacity of 10.5 million tonne. Equipav also has a co-generation capacity of 203 megawatts.
?The mills will be expanded to a combined capacity of 12 mt per annum and 295 MW with a capital expenditure of $218 million,” Shree Renuka said in a notice to the exchanges.
The investment by the Indian company, it said, will fund capital expenditure, partly pay down debt and increase working capital. ?The remaining debt will get repaid over a period of 10 years,? it added.