A root, the sugar and alcohol of the groups Cosan e Shell, put its initial public offering on the street (IPO). With that, it guarantees its debut on the B3 before the beginning of the vacation in the Northern Hemisphere. The company presents itself to the market evaluated, before raising with the share offering, between BRL 67.5 billion and BRL 86.5 billion, that is, pre-money.
The company will parade — now officially — to investors at the point that Cosan understood its value to be when the plan for its listing on B3 became public. At the beginning, there was talk of intervals between R$70 billion and 90 billion and, more recently, comments have risen to something between R$80 billion and R$100 billion.
The company arrives practically already sold. Market sources point out that the offer book is practically covered. Now, see the next extra. Buyers, as was the plan from the beginning, are mainly foreigners. The recent rally in oil, of course, helped to make the environment favorable for the transaction.
The suggested price range for the placement — entirely primary and in preferred — ranges from R$7.40 to R$9.50 per share, after traveling the world and Brazil as a company whose official commodity is carbon.
Raízen, one of the five largest companies in Brazil, with net income exceeding R$115 billion per year, will arrive at B3 as a business whose added value sold to investors goes far beyond ethanol production and fuel distribution. It is in carbon neutralization, which during the pandemic consolidated itself as the world’s number 1 enemy, temporarily second only to the Sars-Cov-2 virus.
The Brazilian company is the best positioned globally to explore second-generation ethanol, produced from sugarcane cellulose (the tailings) and not from sugarcane itself. There is already a small production in progress and what makes the investor’s eye shine is precisely the gain in scale of this technology. But the doubts about the implementation of this plan are “the discount” between what the market wants to pay compared to what Cosan and Shell believe the company is already worth. It is worth mentioning that, in addition to production, the company also dominates distribution, as it operates under the Shell service station banner in Brazil.
Production from sugarcane waste is almost the only one that interests demanding European investors, in terms of sustainability. That’s because it doesn’t compete with food production. Some of the clean energy enthusiasts of the future turn their nose to biofuels that can compete with the global food supply, such as those made from corn, rapeseed or soy.
Who is worth how much?
With Raízen’s IPO, there is still room for appreciation in Cosan, according to analysts. The conglomerate built by the entrepreneur Rubens Ometto is currently worth around R$50 billion at B3. The share rose from around R$20 to R$28, from March until now. With Raízen’s listing, however, it should be worth between R$ 55 billion and 65 billion — that is, there is a potential hidden gain of 10% to 30% if Raízen’s IPO goes as it is within the planned parameters. This already included in the account a 20% holing discount (on the sum of the parts, Raízen, Moove, Compass and Rumo Logística).
Considering absolute success in the sale of the shares, that is, maximum price and total sale (including additional and supplementary lots), Raízen may debut at B3 valued at almost R$ 97 billion — and at least at almost R$ 75 billion.
Despite having reached the estimate that Cosan had initially suggested to the market, Shell — it seems — thought little. During the most recent interactions, Raízen positioned itself as a company that could be worth more than R$ 100 billion already and R$ 150 billion in 2021, according to some investors heard by the EXAME IN.
Shell’s frustration — not quite dissatisfaction — with the valuation is perceived by the size of the offer. Raízen’s plan is to raise between BRL 6 billion (minimum price and base offer only) and BRL 10.4 billion (maximum price and full sale of shares and more extras). The Dutch partner put her foot down in two relevant moments: she did not accept adhesion to the Novo Mercado — to minority shareholders, only preferred shares — and did not accept extra dilution, with the price slightly out of what she understood to be fair.
But Shell, it is well known, was never the biggest enthusiast of this IPO movement. Although for Raízen it is a very relevant strategic move, achieving the independence of its shareholders to raise funds, the limits of the international partner are easy to be understood. Raízen is today, in terms of carbon neutralization, where Shell will strive to be in 2050.
What Raízen avoids per year in carbon emissions — 5.2 million tons — is more than the 3.7 million tons that Tesla has already avoided in 11 years. In addition, it amounts to 2.5 million fewer cars in circulation.
As it is a “carbon-free” or very low impact IPO, Raízen concentrated its efforts to place the offer outside Brazil. But that was in the road-show preview. Now it’s them. In Brazil, at least, investors indicated that an acceptable valuation was around R$70 billion. Around here, the market is used to seeing the operation as a “plant” of sugar and alcohol. But the company presented itself as much more.
The company most comparable to Raízen — in part of the business — and used in conversations with investors is Finnish Neste, valued at 42 billion euros on the Helsinki Stock Exchange, and is one of the darlings of the “carbon free”. The company, whose net revenue was almost 12 billion euros last year and the Ebitda, of 1.5 billion euros, produces 3 billion liters of green diesel. It is therefore traded at well over 20 times Ebitda.
Raízen has reinforced its ability, without the need for any additional hectare, to expand production by more than 3 billion liters (2 billion in second-generation ethanol plus the equivalent of 1 billion liters in biogas), or an entire. This additional adds to its current production, which was 2.5 billion liters in the last harvest. Without these extras, in the crop year ended in March, the company’s Ebitda was R$ 6.6 billion. A 20 times multiple applied here would lead the business to more than R$115 billion — without increased productivity and without Biosev, just over 2021.
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