Shareholders in Votorantim Celulose & Papel and Aracruz Celulose have agreed plans to merge the two companies.
Arainvest Participacoes, which holds 28 per cent of Aracruz, agreed to share control of the two companies with Votorantim Group, which controls VCP. Arainvest will pay US$292 million to Votorantim Group. Meanwhile, VCP will pay US$1.5 billion to Arapar, to increase its existing stake in Aracruz to 56 per cent (up from 28 per cent). Votorantim Group and Arainvest will each own half of the voting stock of a holding company that will control VCP and Aracruz.
- Votorantim Group is owned by billionaire Antonio Ermirio de Moraes.
- Arainvest is a holding company controlled by billionaire Joseph Safra.
- Arapar is a holding company controlled by the Lorentzen family.
Bloomberg reports that according to Votorantim, Credit Agricole’s Calyon unit, Banco Santander and HSBC Holdings have committed to financing the deal.
Aracruz is already the world’s biggest producer of eucalyptus pulp. The merger will help cut costs and allow the company to push for higher prices. The company will produce almost one-third of the world’s market eucalyptus pulp. The companies anticipate producing 8 million tons of paper per year by 2012.
Investment analyst Peter Ping Ho, at Planner brokerage firm welcomed the deal, saying “The transaction will result in a large national company that should gain strength to compete with foreign players.” But shares in both companies fell when the news was announced: VCP’s shares fell 5.4 per cent and Aracruz’s shares fell by 6 per cent. This year, VCP’s shares have fallen by 36 per cent and Aracruz’s shares have fallen by 33 per cent.
In June 2008, VCP was the target of protests as about 600 members of Brazil’s Movement of Landless Peasants (MST) occupied the lobby of the headquarters of the Votorantim Group in Sao Paulo.