Brazilian sugar and ethanol producer, Cosan (CZZ) recently agreed to acquire Esso Petroleum Company, Limited’s wholly-owned subsidiary, Comma Oil & Chemicals Limited, for not more than $100 million. Comma is based in Kent, England.
The acquisition is primarily intended to grow Cosan’s presence in Europe, in particular its lubricant and specialties market. As per the terms of the sale and purchase agreement, Cosan will be responsible for Comma’s finished lubricants and chemicals manufacturing and sales to third parties, in addition to acquiring assets located at Comma‘s Gravesend site in Kent, England, along with trademarks and brands.
Completion of the transaction is expected by the third quarter of 2012, before which Comma will continue to operate under its existing brands. Even after the acquisition is completed, Comma will continue to supply some products in the UK and to ExxonMobil companies.
Recently, Cosan announced its third quarter 2012 financial results, which reveal that Cosan is progressing fast in its lubricants and specialties products business. In the quarter, these businesses registered a 26.1% year-over-year growth. Also, assets in Bolivia, Uruguay and Paraguay were acquired to compliment these businesses. We believe the addition of Comma to Cosan’s portfolio will be an added booster.
With a wider perspective, we remain confident of Cosan’s performance over the longer term on the back of promising growth opportunities. The company’s strategic acquisitions, growing sugar and ethanol demand, energy co-generation and transportation businesses seem to be the prime growth driving catalysts.
We maintain an Outperform recommendation on Cosan. The stock currently holds a Zacks #1 Rank translating into a short-term (1-3 months) Strong Buy rating.
COSAN LTD-A (CZZ): Free Stock Analysis Report
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