UPDATE 1-Dreyfus to take over Brazil's Santelisa by July

(Adds comments from CEO, background)

SAO PAULO, April 30 (Reuters) - The Brazilian subsidiary of French commodities group Louis Dreyfus confirmed on Thursday that it has signed a deal to take over Santelisa Vale, one of Brazil's largest sugar and ethanol groups.

Local unit Louis Dreyfus Commodities Bioenergia (LDC) expects to incorporate Santelisa within two months as long as the Brazilian company restructures its debt of 2.8 billion reais ($1.3 billion), said chief executive Kenneth Geld.

Geld did not disclose the value of the deal but said that, in order to make it viable, LDC Bioenergia had to raise 409 million reais in February.

Santelisa Vale has five mills in Sao Paulo state, with an annual cane crushing capacity of around 20 million tonnes. This is roughly the same capacity as LDC, which has eight ethanol and sugar plants in Brazil.

Other shareholders in Santelisa include U.S. securities firm Goldman Sachs (GS.N) and the investment arm of Brazil's state development bank BNDES.

The Biagi family, which is currently Santelisa's largest shareholder, will likely keep a minority share in the company.

The deal was signed by the French group and the Biagi and Junqueira families earlier in April.

LDC has resumed plans to sell shares on the Sao Paulo Stock Exchange after canceling them last year, citing "unfavorable" market conditions.

Before signing a deal with LDC, Santelisa had been in talks with Brazil's Cosan (CSAN3.SA), private equity firm GP Investimentos (GPIV11.SA) and Bunge (BG.N).

Brazil's cane industry expanded rapidly in recent years as local demand for ethanol grew and exports of the biofuel were seen rising.

The capital-intensive sector leveraged its expansion considerably and was hit hard by the credit crunch resulting from the global financial crisis.

Santelisa Vale was created through a merger between two Brazilian traditional cane groups, Vale do Rosario and Santa Elisa, in 2007. At that time, it announced plans to invest over a billion dollars in expanding existing mills and building new ones. It also planned to go public. ($1=2.177 reais) (Reporting by Inae Riveras; editing by Jim Marshall)