UPDATE 3-Chile's Copec in talks to buy pulpmaker Eldorado Brasil

(Recasts to add details in paragraphs 1-6, changes dateline to SAO PAULO/SANTIAGO)

SAO PAULO/SANTIAGO, June 16 (Reuters) - A unit of Chile’s Empresas Copec SA is in talks to buy a controlling stake in Brazil pulpmaker Eldorado Brasil Celulose SA, whose controlling family ensnared in a corruption scandal put it on the block after signing a plea deal with prosecutors.

In a Friday securities filing, Copec and unit Arauco said they signed a non-disclosure agreement with Eldorado with the purpose of exploring a possible investment, without elaborating further. Earlier in the day, a person involved in the process told Reuters that Copec had already placed a bid for Eldorado.

According to the person, who asked for anonymity as terms of the bid remain private, Eldorado is also a target of Brazilian rivals Suzano Papel & Celulose SA and Fibria SA , which were lured by potentially significant cost savings from an acquisition.

Currently, Brazil’s billionaire Batista family controls 81 percent of Eldorado through investment holding company J&F Investimentos SA, with the rest being owned by two pension funds. Eldorado is among J&F’s flagship assets put up for sale after agreeing to pay a record-setting 10.3 billion real ($3.2 billion) fine for its role in corruption scandals that threaten to topple President Michel Temer.

That settlement followed testimony from J&F’s owners Joesley and Wesley Batista that they spent 600 million reais to bribe nearly 1,900 politicians in recent years.

Buying Eldorado could allow Copec to expand in Brazil, where lawmakers have discussed easing sales of land to foreign investors. Land in Brazil offers global pulpmakers strategic advantages, such as more productive soil than Scandinavia and Chile.

Copec shed 0.4 percent to 7,840 Chilean pesos in midafternoon Friday trading, paring the stock’s 2.3 percent gain since newspaper Valor Econômico reported the planned Eldorado bid earlier this week.

A deadline for bids was unclear, the person said, although Copec’s Arauco unit made an offer this week to the Batistas for their stake. The person added that exclusive talks could start over the weekend.

Eldorado’s debt hovers around 8 billion reais ($2.4 billion), and J&F lenders are pressing for a sale, sources told Reuters last month.

Fibria and J&F declined to comment. Suzano did not have an immediate comment.

Valor reported on Friday, citing a person familiar with the talks, that Copec’s non-binding offer valued Eldorado at 11 billion reais.


For years, family ownership of Brazilian pulp and paper companies has hindered a consolidation, as owners have resisted sharing control.

Just seven pulp and paper M&A deals have taken place in Brazil since the start of last year, compared with 11 each in Sweden and Indonesia and 54 in the United States, according to Thomson Reuters data.

A decision on which company will hold exclusive talks with the Batistas for their stake is “around the corner,” the person said. Negotiating a deal could take a long time because a buyer “will not spare Eldorado from a rather stringent due diligence procedure,” the person added.

One of the Batista brothers said in testimony that Brazilian President Michel Temer condoned use of bribes to silence a potential witness in a corruption scandal. Temer denies the accusations.

This month the government ordered state-controlled lender Caixa Econômica Federal to stop providing financing to the Batista family, Reuters reported on June 7, citing people familiar with the decision, which a source called “retaliation.”

Uncertainty surrounding the plea deal hampered Suzano’s interest in Eldorado, Valor said. Fibria SA, the world’s No. 1 eucalyptus pulpmaker, could bid for Eldorado as early as Friday, Valor reported, without saying how it got the information.

The investment banking units of Itaú Unibanco Holding SA and Banco Bradesco SA are advising Suzano on a bid for Eldorado, according to Valor. Morgan Stanley & Co is Fibria’s advisor, the person said.

Copec’s Arauco is being advised by Banco Santander Brasil SA and law firms Simpson Thatcher & Bartlett LLP and Mattos Filho Advogados.

The banks did not have an immediate comment.

Valor said this week that Fibria seemed the least likely suitor because a key shareholder, state development bank BNDES, would not approve a deal that could shore up the Batistas.

$1 = 3.29 reais Additional reporting by Antonio de la Jara and Felipe Iturrieta in Santiago; Editing by David Gregorio and Diane Craft