SAO PAULO (Reuters) - Fibria SA (FIBR3.SA) and two other pulp producers have hired banks to bid for rival Eldorado Brasil Celulose SA, which may go on the block after the controlling Batista family entered a plea deal in Brazil, Valor Econômico newspaper reported on Tuesday.
Arauco, a subsidiary of Chile’s Empresas Copec SA COP.SN, has hired Banco Santander SA (SAN.MC) to work on a proposal, according to Valor, which did not identify its sources.
Morgan Stanley (MS.N) is advising Fibria, the world’s No. 1 eucalyptus pulpmaker, Valor added.
Another potential contender is Suzano Papel & Celulose SA (SUZB5.SA), which has hired two unidentified large Brazilian investment banks to analyze a bid, Valor reported.
Eldorado’s equity could be worth between 3 billion reais and 4 billion reais ($904 million and $1.2 billion), two unidentified bankers told Valor.
With debt hovering at 8 billion reais, Eldorado could soon be put up for sale, sources told Reuters in recent weeks, after two key members of Brazil’s Batista family were ensnared in a corruption scandal. Eldorado’s lenders are pressing for a sale, Valor said.
J&F Investimentos SA, the company overseeing the Batista businesses, owns 81 percent of Eldorado. The remaining 19 percent is owned by Brazilian pension funds Petros Fundação [PETROS.UL] and Funcef Fundação dos Economiarios [FUNCEF.UL], and special purpose vehicle FIP Olímpia.
Last October, J&F started talks to buy out the stakes that Petros and Funcef own in Eldorado.
São Paulo-based J&F, Fibria and Suzano all declined comment on the Valor report. The banks did not have an immediate comment. A representative of Santiago-based Copec did not immediately comment.
Shares of Fibria gained nearly 1 percent, while Suzano added 1.4 percent on Tuesday in São Paulo trading.
“All Latin America pulp producers would be interested in Eldorado if it becomes available for sale,” Itaú BBA analyst Marcos Assumpção said in a note. “Consolidation could add value through synergies extraction and increased supply discipline.”
Joesley and Wesley Batista, the family members who last month entered the plea deal with Brazilian prosecutors, first want to speak to bidders before hiring an adviser for a sale, Valor said, citing banking executives with knowledge of the matter.
Fibria seems the least likely suitor because a key shareholder, state development bank BNDES [BNDES.UL], is not expected to approve a transaction that could shore up the Batistas, Valor said, without naming its sources.
In their plea bargain, the Batista brothers named Brazilian President Michel Temer in a corruption scandal, unleashing retaliatory actions from the government against the group.
($1 = 3.3176 reais)
Reporting by Guillermo Parra-Bernal; Additional reporting by Felipe Iturrieta in Santiago; Editing by Bernadette Baum and Jeffrey Benkoe