Shell's Brazilian JV Seeks $13.5 Billion Valuation In IPO

A joint venture between Royal Dutch Shell and Brazil’s Cosan is seeking a valuation of up to $13.5 billion (70 billion reais) when it lists on the Brazilian stock exchange, Bloomberg reported, citing unnamed sources.

Earlier reports pegged the valuation of Raizen, one of the biggest fuel distributors in Brazil and the country’s largest sugar and ethanol producer, at up to $17.3 billion. Earlier still, Brazilian media reported Raizen was seeking a valuation of between $17.4 billion and $19.4 billion (90-100 billion reais).

Raizen is the fourth-largest company in Brazil in terms of revenue, behind only Petrobras, miner Vale, and meatpacker JBS.

According to other sources, who spoke to Reuters, Raizen could be valued at between $11.62 billion and $15.5 billion (60-80 billion reais), depending on demand from investors.

Raizen plans to sell 10 percent on the stock exchange to raise $1.16 billion (6 billion reais), Bloomberg’s sources said. According to Reuters’ sources, this is half the amount Raizen planned to raise through the initial public offering initially. The reason for the reduction was not disclosed.

As a biofuels major, Raizen is betting big on ethanol. However, an article from Bloomberg a month ago noted that the increased adoption of EVs, both in Brazil and globally, will undermine the global ethanol market.

The article cited a forecast that electric cars could lead to a 40-percent decline in ethanol demand by 2035. Raizen was named as one of the potential “victims” of this trend, especially since it recently expanded its ethanol production capacity.

“It is clear that an adaption of the new technologies will pose a significant threat to the Brazilian sugar milling sector,” said Soren Jensen, co-author of the forecast, an agribusiness vet. “Players in this industry should start to take it into consideration when making investments decision gradually from now on.”

By Charles Kennedy for Oilprice.com

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