Acquisition in Brazilian energy sector

03.03.2010: ETH Bioenergy and Brenco signed memorandum of understanding concerning a joint venture.

ETH Bioenergy, a large ethanol producer in Brazil, announced in February that it was acquiring its debt-laden rival Brenco for an undisclosed price. Brenco agreed to be acquired by ETH Bioenergy. The merged company will retain the ETH name and will be owned 65 % by ETH shareholders and 35 % by Brenco shareholders.

The combined company will produce three billion gallons of ethanol and 2,700 GW of electricity by 2012, Brenco said in a statement. It will have a crushing capacity equivalent to 40 million tons of sugar cane per harvest. The two companies have already invested about US$ 3.8 billion and have a commitment to additional investments of US$ 3.5 billion from 2010 to 2012 to meet their production targets.

The move follows similar joint ventures and mergers announced in the ethanol industry over the last few months as companies pair up to share the high capital costs needed to meet ambitious expansion goals.