Suzano’s Merger With Fibria: From Paper To Reality

By Seeking Alpha

Summary

Suzano’s merger with Fibria announced back in March was cleared by Brazil’s antitrust agency on October 11. This is a major step towards closing (expected by 4Q18 or 1Q19).

The merger creates a global pulp leader and Brazil’s largest agribusiness player.

Suzano might be appealing if Brazil’s currency were to weaken further (annual exports of ~R$18 bn).

Approved in Brazil

Suzano (OTCPK:SUZBY), Brazil’s leading pulp & paper company, announced on Thursday October 11 that CADE, Brazil’s antitrust agency, approved without restrictions its merger with Fibria (FBR). This is a cash and stock deal worth R$36 bn (~US$11 bn) that could potentially create Brazil’s biggest agribusiness company. The announcement was made at night during aftermarket hours on the eve of Nossa Senhora Aparecida holiday in Brazil. On Friday, with Brazil’s stock exchange closed, the companies’ ADRs were traded at the NYSE (Suzano (OTCPK:SUZBY) +1.43%; Fibria (FBR) +0.16%). This merger has long been speculated by investors in Brazil and now is close to finally coming to fruition or, as marketed by the companies, to go “from dream to paper, from paper to reality”. The closing, expected by 4Q18 or at latest 1Q19, is still subject to the fulfillment of conditions precedent, which is typical in M&A transactions, and approval by the EU’s European Commission, who reportedly started analyzing the transaction on October 9. CADE’s green light greatly mitigates risks associated with the deal falling through, either entirely or having to be subject to restrictions. Once the deal is closed, Suzano (OTCPK:SUZBY) will become Brazil’s largest agribusiness company and will be quite appealing for investors interested in commodities.

The deal: what’s done and what comes next?

Fibria (FBR)’s controlling shareholders, Votorantim and BNDES (Brazil’s development Bank), announced on March 16 that they had accepted Suzano (OTCPK:SUZBY)’s offer. Suzano (OTCPK:SUZBY) shares reacted positively.