Cosan unloads Vale stake to reduce debt, blames high interest rates

SAO PAULO (Reuters) -Brazilian conglomerate Cosan has sold some 173 million shares it owned in Vale, it said on Thursday, unloading a stake that made it an important shareholder of the mining giant as it looks to reduce debt.

Cosan, which did not disclose financial details, said in a securities filing that its decision to sell the stake of roughly 4.05% in Vale was "based solely on the goal of optimizing its capital structure."

According to a source familiar with the transaction, Cosan raised around 9 billion reais ($1.5 billion) with the sale, allowing it to reduce its debt by 40% to some 14 billion reais.

Cosan first purchased in late 2022 a 4.9% stake in Vale, which has a dispersed ownership, in a 21 billion-real deal. The conglomerate had previously sold about 33 million shares as part of its deleveraging strategy.

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

"Vale is an extraordinary asset and I have a lot of confidence in the new management," Ometto said in a statement, referring to a recent management swap in which Gustavo Pimenta was named chief executive.

"However, the current level of interest rates forces us to reduce Cosan's leverage ratio."

Brazil's benchmark interest rate currently stands at 12.25%, and the central bank has signaled it should reach a more than eight-year high of 14.25% as early as March as it tightens monetary policy to fight inflation.

Investors welcomed Cosan's move.

Shares of the conglomerate - which controls logistics firm Rumo, lubricants company Moove, natural gas firm Compass and shares control of Raizen with Shell - rose as much as 8.6% before paring some gains.

"Despite selling at a loss, we would see this transaction as positive, as it would deliver a strong discipline message - that is, focus on leverage, refocus strategy on their integrated energy platform," analysts at J.P. Morgan said.

Vale shares, meanwhile, were up 0.4%. Goldman Sachs analysts said investors had recently been focused on Cosan's potential stake sale as a source of overhang.

($1 = 6.0097 reais)

(Reporting by Leticia Fucuchima, Gabriel Araujo and Paula Arend Laier in Sao PauloEditing by David Goodman, Kylie Madry and Matthew Lewis)