Cosan divests Vale shares to reduce debt, blames high interest rates

SAO PAULO (Reuters) – Brazilian conglomerate Cosa said on Thursday it has sold 173 million shares in Vale, shedding its stake in the mining giant as it looks to reduce debt.

Kosan, which did not disclose financial details, said in a securities filing that its decision to sell its 4.05 percent stake in Vale was “pursuant to the goal of increasing its capital structure.”

Cosan raised about 9 billion riyals ($1.5 billion) with the sale, allowing it to reduce its debt by 40 percent to 14 billion riyals, according to a source familiar with the transaction.

Kozan first bought a 4.9% stake in Vale with dispersed ownership at the end of 2022 for 21 billion reals. The conglomerate had previously sold about 33 million shares as part of its transfer strategy.

Cosan Chairman Rubens Ometto, who said in October that the company was not looking to offload Vale’s stake in the short term, emphasized that the move was linked to Brazil’s high interest rates.

“Vale is an extraordinary asset and I have the utmost confidence in the new management,” Ometto said in a statement, referring to the recent management shakeup that saw Gustavo Pimenta appointed as CEO.

“However, current interest rates will force us to reduce Cosa’s leverage ratio.”

Brazil’s benchmark interest rate is currently at 12.25%, and the central bank has announced that it should reach 14.25% over eight years by March as it tightens monetary policy to fight inflation.

Investors welcomed Cosan’s move.

Shares in the company – which owns logistics company Rumo, lubricants company Move, natural gas company Compass and shares control with Shell – rose as much as 8.6 percent before paring some gains.

“Despite the loss, we view this transaction as positive as it conveys a strong message of discipline – that is, focus on profitability, on an integrated energy platform,” JP Morgan analysts said. Refocus,” he said.

Vale shares rose 0.4 percent. Goldman Sachs analysts said investors had focused on Kosan’s recent share sales as a source of weakness.

($1 = 6.0097 riels)

(Reporting by Leticia Fukushima, Gabriel Araujo and Paula Arend Leier in Sao Paulo; Editing by David Goodman, Kylie Madry and Matthew Lewis)