February 19, 2018 / 1:44 PM / 6 months ago

UPDATE 1-Fibria confirms talks with Suzano over 'alternative strategies' -filing

(Adds Suzano filing, sources commenting on valuations in potential deal)

By Carolina Mandl

SAO PAULO, Feb 19 (Reuters) - Brazilian pulpmaker Fibria Celulose SA said Suzano Papel e Celulose SA representatives have contacted its controlling shareholders to discuss “alternative strategies” for the companies, according to a securities filing on Monday.

Suzano also said in a securities filing that both companies have engaged in preliminary conversations.

Fibria’s controlling shareholders are Votorantim Participações SA and BNDESPar, the investment arm of state-owned development bank BNDES. Fibria did not give details in the filing of what Suzano was proposing.

Fibria shares opened up 0.9 percent at 57.81 reais on Monday, and Suzano shares rose 1 percent to 21.58 reais after both companies confirmed the talks.

Newspaper Estado de S. Paulo reported on Friday that conversations between Fibria and Suzano began three months ago, citing a source close to Suzano.

Sources close to the matter said a potential merger between Fibria and Suzano would have to take into account Fibria’s new production capacity following the opening of its second pulp unit in Três Lagoas, Mato Grosso do Sul State.

The new capacity would change Fibria’s valuation relative to Suzano, the sources added.

Operation at the second Três Lagoas unit began in September and will add 1.95 million tonnes annually in production capacity, raising Fibria’s total annual capacity to 7.2 million tonnes.

Suzano has production capacity of 3.6 million tonnes of pulp a year and 1.2 million tonnes in paper.

Other two people close to the matter said neither company has hired financial advisors yet for the discussions. (Additional reporting by Tatiana Bautzer; Editing by Alistair Bell and Frances Kerry)

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