Shell signs £8bn ethanol deal

City A.M. Reporter
BRAZILIAN sugar and biofuel giant Cosan plans to merge its ethanol and fuel distribution units with Royal Dutch Shell in a deal worth up to $12bn (£7.5bn), extending a trend of growing foreign investment in the fast-growing industry.

The deal significantly expands Shell’s ethanol operations in Brazil and follows moves by British oil major BP, which in 2008 took a stake in a Brazilian biofuel project and unveiled $1bn in investments.

The deal will extend Cosan’s fuel distribution business in Brazil after the company took over US-based Exxon Mobil’s Esso unit in 2008 for nearly $1bn. Cosan last month also agreed to buy a local chain of filling stations called Petrosul for an undisclosed sum.

Oil companies and major global investors have been searching for partnerships in Brazil’s ethanol sector, which is still largely dominated by family firms with complex ownership structures.

Shell has been looking for opportunities in Brazil’s ethanol industry for years. US agribusiness giant Bunge struck a deal in December to buy sugar and ethanol producer Moema for $452m, while French commodities company
Louis Dreyfus said in October that it would take over Santelisa Vale for an undisclosed sum.

Cosan said the Shell deal would help it gain greater access to Brazil’s thriving ethanol retail market as the combined company would be the country’s third-largest fuel distributor.