IPO REPORT: Brazilian Sugar Giant Cosan Files $2 Bln U.S. IPO
money.cnn.com
NEW YORK (Dow Jones) -- Cosan Ltd., the largest grower and processor of sugarcane in the world, filed Monday to raise up to $2 billion in a U.S. amid surging world demand for ethanol as a hedge against Middle East oil.
Cosan ranks as the largest producer of ethanol in Brazil and the second largest in the world. In its IPO, the company cited industry trends including increased global demand for ethanol and growing sugar market opportunities.
"Ethanol is an economically viable, cleaner-burning alternative to gasoline, derived from renewable sources and, therefore, the market for ethanol is expected to grow," the company said.
While ethanol stocks have weakened on rising corn prices, the fuel still enjoys expansion status in the U.S. as an additive for gasoline. Ethanol made from sugar cane is also cheaper and at times more energy efficient than corn or soybeans.
For now, imported ethanol faces a U.S. tariff, which helps protect profit margins from corn- and soybean-based ethanol.
Credit Suisse (CS) , Morgan Stanley (MS) and Goldman Sachs (GS) earned berths and underwriters of the Cosan Ltd. IPO, which will trade on the New York Stock Exchange under the symbol CZZ.
Cosan plans to use about $650 million in IPO proceeds for a new ethanol plant; and $500 million to expand existing sugar and ethanol plants, plus $325 million to build plants to generate electricity from left over sugar cane.
The move comes a day after Cosan shares rose more than 6% in Brazil trades on reports that rival ethanol maker Archer Daniels Midland (ADM) would make a move to bid for the company.
In a filing with U.S. regulators, Cosan said its competitive strengths include its position as a low cost producer; leading market position and strategic relationships with the Kuok Group in Asia and Sucden - both of which are shareholders in the company.
Cosan reported net income of $346.5 million in fiscal year 2007 compared to a net loss of $72.8 million in fiscal year 2006.
The company is controlled by Rubens Ometto Silveira Mello, its indirect controlling shareholder, chairman and chief executive officer, who will have the power to elect all of its directors and determine the outcome of "substantially all matters submitted to our shareholders for a vote or other approval," the company said. |
