Court suspends sale of Eldorado to Paper Excellence – 7/5/2023 – Market

Federal judge Rogério Favreto, from the TRF-4 (Federal Regional Court of the 4th Region), determined the suspension of the sale of Eldorado Brasil Celulose to CA Investment (Brazil), a company linked to the Indonesian Paper Excellence.

In practice, the decision represents yet another victory for the brothers Joesley and Wesley Batista, owners of the J&F Group, to which Eldorado belongs.

In 2017, they sold the pulp company to the Asian group in a deal valued at R$15 billion, but then started a series of legal disputes to block the transaction.

Paper Excellence says it was not notified and therefore will not comment.

J&F claims to have requested clearance in the case file to “collaborate with the authorities.” The Batista brothers’ holding company says, in a note, that Paper Execellence “lied when it stated that it had all the authorizations to sign the Eldorado purchase and sale agreement in 2017”.

The TRF-4 decision, however, was not taken at the request of the Batista brothers. The action began on the initiative of Luciano José Bulligon, a lawyer, politician from União Brasil and former mayor of Chapecó (SC).

He argued that the sale of Eldorado to an Indonesian group would be violating legislation that regulates the purchase of land by foreigners.

As Bulligon says in the lawsuit, the Brazilian company owns 249,000 hectares of eucalyptus forests planted in national rural areas, which could only be negotiated with authorization from Incra (National Institute for Colonization and Agrarian Reform) and Congress.

The former mayor’s request was denied in the first instance at the end of May, but he appealed. At TRF-4, federal judge Favreto considered it necessary to make a preliminary decision, which is urgent and provisional.

Favreto blocked the sale until permissions from the National Congress and Incra, which is linked to the Ministry of Agrarian Development and Family Agriculture, are presented.

The magistrate also suspended, for the same period, the purchase of new rural areas in Brazilian territory by Eldorado, Paper Excellence and CA Investment.

“Such requirements not only protect national sovereignty, but also seek to avoid purely speculative investments, increase social inequality and preserve the social function of property”, wrote Favreto.

He also stated that the urgency of his decision is justified “by the unequivocal proof that the deal is being carried out between the companies”.

Favreto also says, in the decision, that news suggests that Paper Excellence would have the “intention of acquiring other rural areas” in addition to those belonging to Eldorado, without observing the requirements set forth in laws 5,709/71 and 8,629/93.

The magistrate also mentions “incursions by representatives of foreign companies for the acquisition of more rural properties in the western region of Santa Catarina”.

In 2018, in another preliminary decision, Favreto drew attention by determining that Luiz Inácio Lula da Silva (PT) leave prison.

Eldorado Brasil, located in Três Lagoas (MS), was the pulp and paper arm of the group of brothers Joesley and Wesley Batista. In 2017, the company closed with Paper Excellence (through CA Investment), the first stage of the sale of Eldorado.

There was an expectation that full control of the pulp and paper manufacturer would be transferred to the Indonesian group within a year. Before the negotiation was finalized, however, J&F and Paper Excellence began to exchange accusations of non-compliance with the terms of the contract.

Since then, control of Eldorado has been the center of a legal dispute that includes arbitration, dozens of appeals filed by both parties, inquiries for extortion and even espionage through email hacking.

Currently, the Batista family holding company owns 50.59% of Eldorado, and the Indonesians of Paper, 49.41% through CA Investment (Brazil).

In an interview with Sheet in 2019, Claudio Cotrim, CEO of Paper Excellence in Brazil, also accused the Batista family of having requested BRL 6 billion more than what they would be entitled to in the contract to finalize the deal.

The arbitration process, which promised to end the dispute, was favorable to the conclusion of the transfer of Eldorado to Paper Excellence. J&F, however, asked for the annulment of the decision on the grounds of partiality by one of the arbitrators and failures in conducting the process.

The decision of the International Chamber of Commerce, of arbitration, is from February 2021. In March, the Batistas obtained the first decision to suspend the transfer, initiating a sequence of sentences and injunctions to maintain or cancel the change of control of Eldorado .

Currently, the impasse over the billionaire business between the two companies has also become a source of tension in the Court of Justice, where judges exchanged barbs on the subject.