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Bunge Is in Talks With BP to Join Brazil Sugar-Ethanol Assets

Fabiana Batista, Isis Almeida and Vinícius Andrade

(Bloomberg) -- U.S. agribusiness giant Bunge Ltd. is in talks with British oil major BP Plc to form a sugar and ethanol joint venture in Brazil, according to people familiar with the matter.

The companies are in discussions to combine operations in the South American nation, one of the largest producers of both sugar cane and sugar-based ethanol, said the people, who asked not to be identified because the information is private. Bunge and BP are currently valuing their sugar and ethanol assets to agree on the size of each company’s stake, and Bunge has hired Brazilian bank Itau Unibanco Holding SA as an adviser, the people said.

No final agreement has been reached and the talks could fail to produce a deal.

Joining forces with Bunge, the ‘B’ in the quartet of storied ABCD traders of agricultural commodities, would triple BP’s sugar-cane crushing capacity in Brazil, where ethanol is either blended into gasoline or used solely to power flexible-fuel cars. Forming a venture would allow U.S.-based Bunge to separate a struggling business in a tie-up similar to when Royal Dutch Shell Plc and Brazilian sugar and ethanol producer Cosan Ltd. created Raizen in 2010.

Spokesmen for Bunge and BP declined to comment.

Sugar traders have been struggling to make money as bumper crops from Thailand to India depressed prices and curbed volatility. Bunge, which sold its sugar trading business to Singapore-based trader Wilmar International, had been exploring options for its Brazilian milling business. The company said last year it would delay an initial public offering of the unit due to market conditions.

BP started producing ethanol in Brazil in 2008 and its three mills currently have capacity to crush 10 million metric tons of cane a year. Bunge has eight mills with capacity to process 22 million tons.

--With assistance from Mario Parker, Kelly Gilblom and Alfred Cang.

To contact the reporters on this story: Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net;Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net, Pratish Narayanan

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