(Recasts to add details in paragraphs 1-6, changes dateline to
By Guillermo Parra-Bernal and Rosalba O'Brien
SAO PAULO/SANTIAGO, June 16 A unit of Chile's
Empresas Copec SA is in talks to buy a controlling
stake in Brazil pulpmaker Eldorado Brasil Celulose SA, whose
controlling family ensnared in a corruption scandal put it on
the block after signing a plea deal with prosecutors.
In a Friday securities filing, Copec and unit Arauco said
they signed a non-disclosure agreement with Eldorado with the
purpose of exploring a possible investment, without elaborating
further. Earlier in the day, a person involved in the process
told Reuters that Copec had already placed a bid for Eldorado.
According to the person, who asked for anonymity as terms of
the bid remain private, Eldorado is also a target of Brazilian
rivals Suzano Papel & Celulose SA and Fibria SA
, which were lured by potentially significant cost
savings from an acquisition.
Currently, Brazil's billionaire Batista family controls 81
percent of Eldorado through investment holding company J&F
Investimentos SA, with the rest being owned by two pension
funds. Eldorado is among J&F's flagship assets put up for sale
after agreeing to pay a record-setting 10.3 billion real ($3.2
billion) fine for its role in corruption scandals that threaten
to topple President Michel Temer.
That settlement followed testimony from J&F's owners Joesley
and Wesley Batista that they spent 600 million reais to bribe
nearly 1,900 politicians in recent years.
Buying Eldorado could allow Copec to expand in Brazil, where
lawmakers have discussed easing sales of land to foreign
investors. Land in Brazil offers global pulpmakers strategic
advantages, such as more productive soil than Scandinavia and
Copec shed 0.4 percent to 7,840 Chilean pesos in
midafternoon Friday trading, paring the stock's 2.3 percent gain
since newspaper Valor Econômico reported the planned Eldorado
bid earlier this week.
A deadline for bids was unclear, the person said, although
Copec's Arauco unit made an offer this week to the Batistas for
their stake. The person added that exclusive talks could start
over the weekend.
Eldorado's debt hovers around 8 billion reais ($2.4
billion), and J&F lenders are pressing for a sale, sources told
Reuters last month.
Fibria and J&F declined to comment. Suzano did not have an
Valor reported on Friday, citing a person familiar with the
talks, that Copec's non-binding offer valued Eldorado at 11
For years, family ownership of Brazilian pulp and paper
companies has hindered a consolidation, as owners have resisted
Just seven pulp and paper M&A deals have taken place in
Brazil since the start of last year, compared with 11 each in
Sweden and Indonesia and 54 in the United States, according to
Thomson Reuters data.
A decision on which company will hold exclusive talks with
the Batistas for their stake is "around the corner," the person
said. Negotiating a deal could take a long time because a buyer
"will not spare Eldorado from a rather stringent due diligence
procedure," the person added.
One of the Batista brothers said in testimony that Brazilian
President Michel Temer condoned use of bribes to silence a
potential witness in a corruption scandal. Temer denies the
This month the government ordered state-controlled lender
Caixa Econômica Federal to stop providing financing to the
Batista family, Reuters reported on June 7, citing people
familiar with the decision, which a source called "retaliation."
Uncertainty surrounding the plea deal hampered Suzano's
interest in Eldorado, Valor said. Fibria SA, the world's No. 1
eucalyptus pulpmaker, could bid for Eldorado as early as Friday,
Valor reported, without saying how it got the information.
The investment banking units of Itaú Unibanco Holding SA and
Banco Bradesco SA are advising Suzano on a bid for Eldorado,
according to Valor. Morgan Stanley & Co is Fibria's advisor, the
Copec's Arauco is being advised by Banco Santander Brasil SA
and law firms Simpson Thatcher & Bartlett LLP and Mattos Filho
The banks did not have an immediate comment.
Valor said this week that Fibria seemed the least
likely suitor because a key shareholder, state development bank
BNDES, would not approve a deal that could shore up the
($1 = 3.29 reais)
(Additional reporting by Antonio de la Jara and Felipe
Iturrieta in Santiago; Editing by David Gregorio and Diane