UPDATE 4-Brazil's Cosan proposes $4.7 bln takeover of railway firm ALL
* ALL would hold 63.5 percent equity in new company
* Cosan's Rumo would name most of the board, have control
* Rumo pricing ALL shares at premium of 56 percent
By Reese Ewing and Roberta Vilas Boas
SAO PAULO, Feb 24 (Reuters) - Brazilian sugar and ethanol firm Cosan SA proposed on Monday to take over America Latina Logistica SA in a $4.7 billion deal that would form Latin America's largest railway and logistics company.
The planned takeover, which Cosan officials expect ALL's board and shareholders to approve, would create a new logistical giant in a country where access to cheap transportation infrastructure comes at a premium.
By creating a bigger player in the sector that is still underdeveloped by Cosan, chairman and controlling shareholder Rubens Ometto will further his conglomerate's interests ranging from agribusiness to fuel distribution. Under the terms of the deal, shareholders of ALL, as America Latina Logistica is commonly known, would own most of the capital of the combined entity, while Cosan would name most of its board members.
"We think the operational integration of ALL and (Cosan's) Rumo could result in quick wins due to asset turnover optimization to transport sugar, ethanol and soybeans," UBS Securities analyst Victor Mizusaki wrote in a client note.
In a separate securities filing, ALL said the combined value of the new company would total 10.96 billion reais ($4.7 billion), of which ALL shareholders would hold 63.5 percent. Cosan is proposing to value ALL shares at 10.184 reais per share, a 56 percent premium to its closing price on Friday.
The new company will merge ALL's assets into Cosan's Rumo Logistica SA unit. Cosan will spin off the logistics unit and list its shares on the Sao Paulo exchange, Cosan said in a securities filing.
"Rumo is a cash generator, so the resulting company will have good cash flow," Cosan Chief Executive Officer Marcos Lutz said in a call with investors.
ALL shares soared as much as 14 percent in São Paulo trading, while Cosan gained as much as 5.6 percent. That helped pare back ALL's 28 percent drop over the past year and Cosan's 21 percent decline in the same period.
Shares of Cosan closed at 36.60 reais, up 3.5 percent on Monday. ALL closed 8.9 percent higher at 7.10 reais.
BOOST TO RAIZEN VENTURE
The railway assets of ALL would also add value to Cosan's 50-50 joint venture with Royal Dutch Shell Plc known as Raizen, which is the main competitor of state-run oil company Petróleo Brasileiro SA in fuel distribution in Brazil.
"ALL is a unique asset. Rail is the most efficient, in terms of costs, to transport in an area where there are no waterways," Lutz added.
President Dilma Rousseff has struggled over the past years to expand Brazil's aging port terminals and railway capacity, despite the country's prowess as a key supplier of many of the world's commodities such as sugar, coffee, soybeans, orange juice and meats.
The move follows a long struggle by Cosan to find a way to combine its logistics assets with ALL, which for years was the largest railway operator in Latin America. Cosan relies on ALL to transport much of its sugar to port in Santos.
Ometto attempted in August to buy a controlling stake in ALL but was rebuffed by the company.
Lutz said that if ALL approves the deal, which he expects, the capacity contract that Rumo holds with ALL to transport its sugar to port would end. The contract has been the focus of a legal dispute between the two companies after ALL stopped transporting Rumo's sugar, driving up its freight costs.
ALL said it stopped service because Rumo had ceased payments on the contract. A merger may offer a way out of the costly lawsuits that would otherwise be fought out in the courts.
Cosan will also list the shares of Cosan Energia SA, a unit that houses Cosan's sugar and ethanol, fuel distribution, natural gas distribution, lubricants and land management divisions, the filing added.
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