* Guaiba gives CMPC access to Brazil, No. 1 pulp producer
* Aracruz to sell Guaiba to Chile's CMPC to cut debt
* CMPC seeks to sell up to $500 mln each in stock, debt
* S&P may downgrade CMPC as acquisition to boost debt
* Shares of CMPC, Fibria jump; Aracruz stock falls
(Adds Standard & Poor's statement on CMPC, CMPC seeks to raise up
to $1 bln)
By Alonso Soto and Guillermo Parra-Bernal
SANTIAGO, Sept 23 Chilean forestry group CMPC
CAR.SN said it is in talks to buy a unit of Brazilian giant
Aracruz ARCZ6.SA(ARA.N) for $1.4 billion, which would give it
access to the world's cheapest pulp producing market.
Santiago-based CMPC said in a regulatory filing late on
Tuesday that it signed a memorandum of understanding with
Aracruz to buy the Guaiba unit. Under the accord, Fibria
VCPA3.SA, the company formed after Aracruz's takeover by rival
VCP, will hold exclusive talks with CMPC until a deal is struck.
The purchase underscores the cost advantages and high forestry
potential that pulp companies in Brazil, the world's top pulp
producer, have relative to rivals in North America and Europe.
Brazilian pulp makers are operating at full capacity and opening
new factories, even as the global market is facing its worst
downturn in six decades.
"This makes sense for the Chileans because they are
entering a cost-competitive market that has outstanding growth
prospects going forward," said Jayme Alves, a paper and pulp
analyst with Sao Paulo-based Spinelli Corretora.
The transaction would allow CMPC, controlled by Chile's
Matte family, to become the world's second-largest pulp
producer by 2013, with capacity of 3.8 million metric tons,
according to estimates provided by Sao Paulo-based Itau
Guaiba has pulp, forestry, paper and wood businesses that
include a plant to process cellulose and another to produce
paper. The transaction also includes 212,000 hectares of land
of which 60 percent is planted with eucalyptus trees ready to
Signs of a recovery in the global pulp and paper market are
emerging and companies around the world are boosting output as
prices rise worldwide. Fibria will boost prices for the fifth
time this year in October, indicating it has gained pricing
power amid a revival of demand, a person familiar with the
decision told Reuters on Tuesday.
Global pulp inventory fell to the lowest level in more than
seven years this month and prices have recovered mainly due to
China's growing need for fiber to accommodate urbanization.
CMPC shares surged 8.5 percent to 17,962 Chilean pesos on
Wednesday, the biggest intraday jump since at least August
2007. The stock has gained 14 percent in the 12 months that
ended on Sept. 22.
Standard and Poor's said it may downgrade CMPC's A-minus
rating within the next 90 days as the deal might increase the
CMPC's board will ask shareholders to approve a share sale
plan of $500 million and a bond issuance worth up to $500 million
to fund the acquisition, according to a regulatory filing.
"The very positive outlook for the pulp market, as well as
CMPC's efficient management lead us to highlight this as a good
acquisition for the company," analysts at Bci Corredor de Bolsa
said in a note to clients on Wednesday.
The Guaiba purchase would be one of the largest-ever
acquisitions by a Chilean company and comes as the country
grapples with the ravages of the global financial storm.
CMPC has a presence in Argentina, Colombia, Mexico, Peru and
Uruguay and, before the Guaiba acquisition, was the second-largest
Chilean pulp maker, behind Copec's COP.SN Arauco forestry unit.
Itau said CMPC's offer would value Guaiba at almost half
the $3,000 per metric ton of pulp produced with existing assets
and below the $2,400 per ton at which the brokerage values
parent Fibria's output per ton.
"Guaiba valuations might have been distorted by the size of
Aracruz debt," said Alves of Spinelli.
Common shares of Fibria rose 1 percent to 29.99 reais in
Sao Paulo. Aracruz reversed early gains and fell 0.3 percent to
Aracruz management had considered selling the Guaiba plant
for a long time to help trim indebtedness.
Aracruz was one of several companies that posted hefty
derivatives-related losses last year, when Brazil's currency
tumbled 33 percent against the dollar amid the global financial
"In our view, the deal does not make strategic sense for
Fibria," said Itau Securities analyst Marcos Assumpcao in a
note to clients. It is "bringing a new competitor to Fibria's
backyard ... and sacrificing Fibria's project with the fastest
Fibria Chief Financial Officer Marcos Grodetzky said in
July the company will rely on asset sales and the freeze of
some investments to cut net debt to the equivalent of 5.2 times
its EBITDA, or earnings before interest, taxes, depreciation
and amortization, next year.
The ratio of net debt to EBITDA is expected to be 7.7 this
year. Chief Executive Carlos Aguiar also said Fibria's factory
capacity should remain unaltered for up to three years.
(Additional reporting by Manuel Farias and Antonio de la Jara;
Editing by Dave Zimmerman, Andre Grenon, Phil Berlowitz)