Mercuria Bets on Argentina’s Energy Market in USD 1.4bn Raízen Deal

Mercuria Energy Group has struck a deal to buy Raízen’s downstream business in Argentina for roughly USD 1.4bn, marking one of the largest energy transactions to hit the country in recent years and pushing the Swiss trading house further into owning physical infrastructure rather than just moving barrels around.

The agreement hands Mercuria the Dock Sud refinery, a lubricants plant, aviation-fuel operations, fuel terminals and a sprawling network of more than 800 Shell-branded service stations that together control about 18% of Argentina’s fuel-distribution market. Mercuria will pay cash at closing, subject to the usual adjustments for working capital and net debt, and will also take on Raízen Argentina’s existing debt. The transaction remains subject to regulatory and court approvals and is expected to close during the current crop year.

The sale is really a story about a stretched balance sheet finally getting some relief. Raízen, the Brazilian sugar, ethanol and fuel-distribution giant jointly owned by Cosan and Shell, has been under pressure from heavy capital spending, bad weather and wildfires that hammered its sugarcane crops, and it’s currently working through an out-of-court restructuring of about BRL 65bn (USD 12.8bn) in debt, one of the biggest such workouts in Brazilian history. Proceeds from offloading the Argentine business will go toward shoring up that capital structure, and the company has cast the move as part of a wider effort to trim its portfolio and put capital behind markets it sees as core to its future.

On the other side of the table, the logic is about building rather than shedding. Mercuria, founded in Geneva back in 2004 by former Goldman Sachs traders Marco Dunand and Daniel Jaeggi, is wagering on Argentina’s long-term energy demand and using the acquisition to bolt refining, fuel marketing and retail distribution onto its trading operations, a strategy that echoes what rivals like Vitol, Trafigura and Gunvor have been doing as they build out ownership of physical assets worldwide.

Getting here took a while. The sale process stretched on for roughly 18 months and pulled in interest from heavyweights including Trafigura, Vitol and Saudi Aramco, along with local Argentine investors, before Mercuria came out on top, teaming up with Argentine businessman José Luis Manzano, a longtime partner of the firm, to close out the deal.

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