Cosan eyes $2 bln to boost ethanol
Brazil sugar giant files for U.S. IPO
By Steve Gelsi, MarketWatch
Last Update: 12:03 PM ET Aug 15, 2007
NEW YORK (MarketWatch) -- Cosan Ltd. plans to raise up to $2 billion in its U.S. initial public offering Thursday as the world's largest grower and processor of sugar cane wades into equity markets to beef up its ethanol business.
GS) were underwriters of the Cosan Ltd. IPO, which will trade on the New York Stock Exchange under the symbol "CZZ."
Sao Paolo, Brazil-based 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 leftover sugar cane.
With 196 million shares outstanding after the IPO, Cosan will carry a market cap of nearly $5 billion based on its trading price of $24.80 a share on Wednesday in Brazil.
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.
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 with 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. End of Story
Steve Gelsi is a reporter for MarketWatch in New York.
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