Market Roundup: A new chapter in the fight over Eldorado

A new chapter in the J&F-Paper Excellence dispute for Eldorado

This month, the dispute between J&F Investimentos (from the same group as meat giant JBS) and the Indonesian company Paper Excellence (PE) over Eldorado, one of the largest pulp producers in Brazil, could reach a decisive moment. 

In December, Incra, Brazil’s agrarian reform institute, concluded in an analysis that the agreement for J&F to sell Eldorado in 2017 for BRL 15 billion (USD 3.1 billion) should not have been signed because PE was not duly authorized by the institute or Congress to acquire land in the country. Foreign companies have limited rights when it comes to buying land in Brazil. 

Why it matters. Incra recommended the voluntary termination of the deal and gave the parties until last Monday to respond, in addition to informing the commerce registry of São Paulo— where Eldorado is headquartered — and the Securities Commission (CVM). 

• In addition to the direct dispute between J&F and PE, a class action and a lawsuit filed by the Federal Prosecutor’s Office are seeking the annulment of the deal.
• Although Incra is only an administrative agency, it has been accepted as an assistant to federal prosecutors and its analysis supports their case. Based on this argument, an appellate judge issued an injunction suspending the sale of the cellulose producer.

State of play. In light of Incra’s opinion, Eldorado’s management team informed the market on January 2 that it would recommend both parties to cancel the agreement in order to avoid any sanctions that could harm the company’s operations.

• At the same time, J&F notified CA Investment (PE’s Brazilian arm in the deal), proposing the date and time for the cancellation of the sale and the return of the BRL 3.8 billion that PE had already paid for a 49 percent stake in Eldorado. The proposed date for the meeting is January 23.
• Paper Excellence did not officially respond to J&F’s “invitation.” Instead, it said it...