Raízen, a joint venture between the Cosan group and oil giant Shell, is considering the sale of a stake in its second generation (E2G) ethanol plants as a way of raising funds for new investments and helping Cosan, its main shareholder , to reduce the level of debt.
In addition, the company is also evaluating the possibility of selling its stake in the Brazilian convenience store operator Oxxo, which is not considered a strategic asset for Raízen’s business, according to sources close to the matter, who requested anonymity due to the confidentiality of the discussions.
The Brazilian operator of Oxxo stores is Grupo Nós, a partnership between Raízen and the Mexican company Fomento Economico Mexicano SAB, which manages the convenience store brand throughout Latin America. However, retailers in Brazil face difficulties in the face of competition from online commerce and high interest rates, which could make it difficult to sell this stake.
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No final decision has been made regarding either deal, and the talks may not result in a deal, the sources said. Raízen preferred not to comment on the matter.
In the case of the E2G business, Raízen is studying the formation of a partnership in a new business unit that would bring together all related assets, including two plants already in operation. The new partner would enter the joint venture by contributing capital to this new E2G unit. As a result, Raízen could stop making the recurring investments that it currently commits from its profits.
Participation in the ethanol business was offered to investment funds, according to the sources. E2G is produced from dry plant matter, also known as lignocellulosic biomass. Raízen’s proprietary technology uses sugarcane waste to increase ethanol production by 50%. According to a presentation available on the company’s website, Raízen already has around US$4.48 billion in contracted sales.
Cosan, a sugar and ethanol empire that has expanded into areas such as lubricant production, fuel distribution, rail transport and residential natural gas supply, saw its shares fall to their lowest level since the beginning of 2019. Debt of the company increased after the 2022 decision to take on debt to buy a minority stake in the mining company Vale, an investment that BTG Pactual classified as having a “mediocre” return.
Cosan has informed investors that all options are being evaluated to improve its balance sheet, including the partial or full sale of its 4.1% stake in Vale, according to Bloomberg, which cited sources close to the matter in September. The company also considered selling Raízen’s fuel distribution business in Argentina.
So far, no final decision has been made.
