SAO PAULO (Reuters) - Brazilian pulp producers Fibria Celulose SA (FIBR3.SA) and Suzano Papel e Celulose SA (SUZB3.SA) are close to announcing a tie-up, the head of the state development bank that owns a stake in both companies told newspaper Valor Economico on Thursday.
Paulo Rabello de Castro, president of BNDES [BNDES.UL], confirmed the ongoing talks, saying, “We have been working to bring together these two giants,” according to a report on the newspaper’s website.
BNDES, which owns 29 percent of Fibria and 7 percent of Suzano, supports a merger between the two.
A source at BNDES told Reuters talks were at an advanced stage, but upper management has not yet analyzed a formal proposal. The bank is considering divesting its stakes in the companies at least partially, the source added, asking for anonymity because discussions are still private.
The source said the bank could use cash raised from the merger to fund an expected rise in demand for its loans next year.
According to the paper, which cited unnamed sources close to the companies, Suzano would buy out most of the 29.5 percent stake that industrial conglomerate Votorantim Participações SA [VOTOR.UL] has in Fibria.
Suzano is structuring the offer in a way that avoids triggering a poison pill in Fibria’s bylaws, the paper added. According to those rules, if Votorantim sells a stake higher than 25 percent, there would be a mandatory offering to all shareholders.
Shares of both companies rose about 5 percent in early afternoon trading in Sao Paulo following the report.
Contacted by Reuters, representatives for Fibria, Suzano and Votorantim did not immediately comment on the report.
Reporting by Tatiana Bautzer in Sao Paulo and Rodrigo Viga Gaier in Rio de Janeiro; Editing by Frances Kerry and Rosalba O'Brien