Mercuria to acquire Raizen’s Argentina fuel assets in US$1.4-billion deal

Global trading house Mercuria Energy Group Ltd. has reached a deal to acquire one of Argentina’s biggest refineries and a network of hundreds of petrol stations from Brazil’s struggling Raizen SA.

The acquisition, valued at US$1.42 billion, comes after fierce competition from rival trader Vitol Group and caps drawn-out negotiations that involved Mercuria’s minority partner in Argentina, business magnate Jose Luis Manzano, and Raizen’s creditors including BTG Pactual Holding SA.

“Mercuria believes Argentina represents an important energy market with strong long-term fundamentals and significant opportunities for operational growth and investment,” the company said in a statement Thursday.

The deal is a triumph for President Javier Milei, who is up for re-election next year and is keen to show that his free-market reforms can lure foreign direct investment. Mercuria’s bet on Argentina comes as commodity trading houses increasingly look to downstream oil facilities as a way to keep up the windfall profits they booked during an energy crisis earlier this decade.

Mercuria, via its subsidiaries Latam Downstream Holdings Ltd and Silver Projects I S.A.U, takes control of the Dock Sud refinery on the outskirts of Buenos Aires, the third biggest in Argentina, and about 700 gas stations accounting for roughly one fifth of nationwide fuel sales. It’s expected to close in the current crop year, pending regulatory approvals, according to a statement Thursday.

The deal creates a third integrated oil producer in Argentina – those that both drill for crude and refine it. State-run YPF SA is the biggest, followed by Pan American Energy Group, which is half-owned by British oil major BP Plc.

Mercuria, via its subsidiary Phoenix Global Resources Plc, where businessman Manzano is also a partner, produces much less crude than YPF or Pan American. But it is set to invest billions of dollars over the coming years to ramp up output in Argentina’s burgeoning Vaca Muerta shale patch.

Founded in 2004 and run by Swiss oil traders Marco Dunand and Daniel Jaeggi, Mercuria is one of biggest traders of energy behind the likes of Trafigura Group, Gunvor and Vitol Group. Historically though, it has lagged its competition in respect to asset investments but has recently begun a concerted push into physical markets particularly in South America.

Raizen, a biofuels joint venture of Shell Plc and Cosan SA, has garnered informal support from a majority of its creditors for a final restructuring plan under an out-of-court debt rework, people familiar with the matter said on Wednesday. Asset sales, including the Argentine unit, is part of the plan, the company said. Raizen has a 65 billion-real (US$12.9-billion) debt load, a consequence of some failed bets in ethanol and aviation fuel, plus high interest rates and weaker-than-expected harvests.

related news

by Jonathan Gilbert, Lucia Kassai & Cristiane Lucchesi, Bloomberg