USA – The global agribusiness and food company has filed a registration for a potential public offering of its sugar and ethanol business, Bunge Açúcar & Bionergia with the Brazilian Securities Commission.
With the listing which is subject to market conditions and valuations, Bunge plans to operate the business as a stand-alone entity after obtaining debt financing for the unit.
After the IPO, Bunge said it would maintain majority stake, enabling it to participate in future value creation driven by the stand-alone company’s growth and cyclical improvement in global sugar market conditions.
Bunge Açúcar & Bionergia owns and operates eight mills located across the Southeast, North and Midwest regions of Brazil with 2 million metric tons of crushing capacity per year.
It has the flexibility to produce a mix of ethanol and sugar, and generates renewable electricity through its cogeneration facilities to self-sufficiently power all of its mills and sell surplus electricity to the Brazilian power grid.
Based on St. Louis Post report, many sugar companies in Brazil are facing low profit margins and high debt even as the global sugar market is challenged by supply gut, pushing raw sugar prices to the lowest levels in two and a half years.
Bunge entered the sugar and ethanol sector in Brazil in 2010, when it bought the holding Moema Participações, which controlled the then six mills.
“It is a major milestone, in a sense that we have a business that is now prepared to stand on its own two feet, and it’s really a matter of when we activate that,” said Soren W. Schroder, chief executive officer of Bunge in a May 16 presentation at the BMO Capital Markets Farm to Market Conference in Chicago.
“The preparation and the work to get to that point has been significant, starting with getting the business to perform in a positive way EBIT-wise and to more than cover all that CapEx and other requirements from the business so it’s cash positive.
So that was a major undertaking, and other big credit to the team that has done it, and it’s now promoting that segment.”
Decision to separate the Brazilian sugar business from its Agribusiness and Food & Ingredients businesses was reached at by the company to focus on the latter.