Suzano and Fibra Merge, Creating Global Pulp Giant

Brazil’s Suzano Papel e Celulose SA this week won the battle to acquire larger rival Fibria Celulose SA, (also based in Brazil), creating the world’s largest pulp producer. According to a Reuters news report, controlling shareholders Votorantim Participações SA and BNDESPar, the investment arm of Brazilian state development bank BNDES, on Friday, March 16, 2018, accepted Suzano’s offer worth BRL 36 billion ($11 billion) in cash and shares at current prices. 

An aggressive rival all-cash bid from Netherlands-based Paper Excellence, controlled by Indonesia’s Widjaja family, fell short as Votorantim and BNDES judged that its proposal lacked necessary funding. 

 

The transaction will be concluded after approval from the Shareholder Meetings of both Suzano and Fibria, as well as regulatory authorities, and the fulfillment of conditions precedent that are typical to transactions of this nature. 

"Our dream of creating this company is now becoming a reality," said Walter Schalka (photo a/bove), CEO of Suzano Papel e Celulose. "We plant, harvest, produce, and transform pulp, a renewable raw material that is the basis for products that are part of the lives of people all over the world."

Suzano and Fibria, which already share similar values and principles, will build a future together. The company resulting from this combination will have 37,000 employees and contractors, with assets positioned strategically in Brazil and around the world. Its 11 industrial units will produce annually 11 million metric tons of market pulp and 1.4 million metric tons of paper, with annual exports of around BRL 18 billion and investments planned for 2018 of about BRL 6.4 billion. Its cash cost will be among the lowest in the sector globally, underlining its efficiency and strengthening its competitiveness in a global market of more than 50 players.

"We are announcing a balanced transaction that underscores our business strategy," explained Schalka. 

The commitment signed by Suzano and Fibria stipulates that each share of Fibria will receive BRL 52.50, adjusted for inflation by the CDI rate from today to the date of financial settlement of the operation, and 0.4611 share of Suzano, adjusted as per the transaction documents.

Suzano will list Level 3 ADRs on the New York Stock Exchange (NYSE), keeping only one class of shares with 100% tag along rights, and will have free float of more than 50%. In the coming months, Suzano will request the registrations to the U.S. Securities and Exchange Commission (SEC) or applicable exemptions; and both Suzano and Fibria’s shareholders meetings will be called to approve the transaction.

Suzano notes that with this week’s announcement, it reinforces its commitment to the highest standards of corporate governance based on transparency, fairness, accountability, and corporate responsibility. In November 2017, the company joined the "Novo Mercado" segment of B3, converting all of its preferred shares into common shares at the ratio of one common share for each preferred share. This move represented an important strategic step towards new growth cycles, such as the one announced this week, and reaffirms Suzano’s commitment to Brazil, the capital markets, and all of its stakeholders.