Pending Issues Still Complicate Suzano-Fibria Merger

Brazilian pulp and paper groups Suzano Papel e Celulose SA and the controlling shareholders of Fibria Celulose SA are negotiating a potential merger that would combine two of the world’s largest producers, especially in the market pulp arena. However, there are still pending issues relating to the merger between Fibria and Suzano, the two companies noted in a joint statement this week, following a report by the local Valor Econômico newspaper, which said the two parties were close to announcing a deal.

Fibria reported in a filing this past Friday (March 9, 2018) that its controlling shareholders, Votorantim and BNDESpar, the shareholding arm of Brazil’s national development bank, BNDES, "have had discussions with Suzano and its controlling shareholders, with a view to assessing possible business involving Fibria and Suzano." It added that "the parties are still analyzing the eventual possibilities of a transaction. However, there is no definition of the terms and conditions for the conclusion of a possible business."

Suzano also confirmed the talks, noting there are still pending issues to be negotiated, adding that there is no guarantee that the potential transaction would happen. Suzano emphasized that, given the issues that remain in the talks, it is "not possible to confirm the veracity of the news." "There are negotiating issues pending definition, which affect the operation and its conditions, including financial and structural issues, which is why it is not possible to validate the truth of the report," Fibria and Suzano said.

BNDES CEO Paulo Rabello de Castro told Valor Econômico that "we have been talking to bring these two giants together." BNDESpar owns 29.08% of Fibria and 6.9% of Suzano. Fibria, which reportedly has a market value of $11 billion, is the world’s major producer of eucalyptus pulp. According to the newspaper article, which cited unnamed sources close to the companies, Suzano would buy out most of the 29.5% stake that industrial conglomerate Votorantim Participações SA [VOTOR.UL] has in Fibria.

Suzano, with a reported market value of $7.7 billion is the world’s second largest producer of cellulose made of eucalyptus, and Latin America’s biggest maker of printing and writing paper.

Suzano and Fibria earlier (this past February) had verified initial "tie-¬up" discussion on a possible offer in between the business.