April 30, 2010 / 8:41 PM / 9 years ago

UPDATE 1-Guarani shares surge on talk of Petrobras tie-up

* Guarani shares jump 12 pct on tie-up talk

* Partnership fits in with Petrobras biofuel strategy

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SAO PAULO, April 30 (Reuters) - The shares of one of Brazil’s largest sugar and ethanol groups, Acucar Guarani SA ACGU3.SA, surged on the Sao Paulo Stock Exchange Friday on talk of a biofuels partnership with the state-run oil company Petrobras (PETR4.SA).

The shares jumped 12 percent about half an hour before Petrobras’ biofuels division was scheduled to hold a news conference in Sao Paulo.

A spokesman for Guarani, which is controlled by the French sugar group Tereos, said the company did not comment on market rumors when asked about a possible merger with Petrobras, which would not comment prior on the subject of the conference.

A trader, a leading analyst and another source, all of whom requested not to be named, confirmed Petrobras has been in talks with Guarani, Brazil’s fourth largest sugar and sixth largest ethanol producer, and is likely to announce some form of partnership or joint venture in the biofuels sector.

Petrobras wants to become a leading players in the global biofuels sector, with a production target of 3.9 billion liters by 2013.

But with limited experience in cane, sugar and ethanol production, the company strategy has been to buy minority stakes in other companies to meet its aggressive targets.

The company said in December that it planned to buy stakes in two or three ethanol plants in in 2010. In 2009, it bought a 100 million liter plant in the state of Minas Gerais.

It is currently a large distributor of ethanol through its chain of service stations, but production is only beginning.

Petrobras is building an ethanol pipeline and river barge system to bring ethanol from frontier cane areas in Brazil’s center-west to the its main refining and port terminal assets in Sao Paulo and Rio de Janeiro states.

The company also has joint ventures with Japanese trading company Mitsui (8801.T) and other companies in the region to develop its ethanol distribution network in Asia. Brazil is the world’s largest exporter of ethanol. (Reporting by Reese Ewing and Roberto Samora; editing by Carole Vaporean and Andre Grenon)

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