July 10, 2019
(Bloomberg) – US agribusiness giant Bunge Ltd. is in talks with British oil company BP Plc to create a joint sugar and ethanol company in Brazil, according to people familiar with the matter.
The companies are in talks to merge operations in the South American nation, one of the largest producers of sugar cane and sugar-based ethanol in the world, said the people, who asked not to reveal their identity because the information is private. Bunge and BP are evaluating their sugar and ethanol assets to agree on the size of each company’s stake, and Bunge has hired the advisory services of Brazilian bank Itau Unibanco Holding SA, the people said.
No definitive agreement has been reached and the talks may not result in a transaction.
A merger with Bunge would triple BP’s sugarcane crushing capacity in Brazil, where ethanol is mixed with gasoline or used alone for flexible fuel vehicles. The creation of a company would allow Bunge, based in the United States, to separate a troubled business into an alliance similar to when Royal Dutch Shell Plc and Brazilian sugar and ethanol producer Cosan Ltd. created Raizen in 2010.
Spokesmen for Bunge and BP declined to comment.
Sugar traders have struggled to make money, as plentiful harvests, from Thailand to India, depressed prices and reduced volatility. Bunge, which sold its sugar trading business to Wilmar International in Singapore, had been exploring options for its processing business in Brazil. The company said last year that it would postpone an initial public offering of the unit due to market conditions.
BP started producing ethanol in Brazil in 2008 and currently its three plants have the capacity to crush 10 million metric tons of cane per year. Bunge has eight mills with capacity to process 22 million tons.