Fight over Eldorado Celulose turns into a web of parallel actions – 03/30/2024 – Market

For a former judge at the TJ-SP (São Paulo Court of Justice), it should be a trivial question.

In his opinion, if it were a bakery purchase and sale contract, the judge would give a four-page sentence and the case would come to an end.

But this is not a bakery purchase/sale, the main process already has more than 6,000 pages, and “ending” is not on the horizon.

The dispute between J&F and Paper Excellence for controlling interest in Eldorado Celulose, instead of ending, became a spider’s web of parallel actions.

J&F, owned by brothers Joesley and Wesley Batista, agreed to sell the company to Paper, a company owned by Indonesian Jackson Wijaya, for R$15 billion, in September 2017. Months later, the buyer went to court alleging that the seller did not cooperate for the release of the guarantees, which would conclude the deal.

It was the kick-off in the branching of processes. For the next six years, in a fight that for outside observers became personal,

• discussions about conflict of competence,
• arbitrations,
• cancellation requests,
• reports of hacking and threats,
• criminal investigations,
• convictions for bad faith litigation,
• defamation lawsuit,
• multiple requests to the STJ (Superior Court of Justice) for suspensions,
• injunctions and reopenings,
• questioning about land,
• popular actions and
• Incra opinions.

Very little of this related to the purchase and sale agreement itself.

The last example that the issue is not a simple business disagreement happened in November last year. At the suggestion of the arbitration, there was a meeting of shareholders in Frankfurt, Germany. Joesley and Wijaya met, accompanied by executives from J&F and Paper.

“Do you want to fuck me?”, the Brazilian billionaire repeatedly asked the Indonesian billionaire.

The irritation was because Wijaya did not accept the only proposal that his opponent put on the table: take back the R$3.8 billion he paid in 2017, return to J&F the 49.41% of Paper’s shares and continue life.

In the last quarter of 2023, Eldorado had a net profit of R$444 million.

Jackson replied no, and the president of his company in Brazil, Claudio Cotrim, was outraged. For Joesley and Francisco de Assis e Silva, legal director at J&F, it was a reasonable offer. They believe that, if the dispute continues in the judicial and political sphere, the deal will be undone anyway.

According to Paper, Joesley had made threats that he would have political influence in Brasília and there was no risk of him losing this fight. This reinforces the view of lawyers who observe the case that the businessman considers the possibility of being defeated in Brazil by a foreigner to be an unfortunate one. J&F denies this version and says that the threats did not occur.

The share portfolio and the remainder of the payment of R$15 billion as determined by the arbitration are in the custody of Itaú. They were invested in an investment fund. Today R$8.66 billion is available.

The divergence in the share transfer triggered the start of the arbitration process. Paper won 3-0. J&F contested the result and asked for it to be annulled. He filed a complaint against one of the arbitrators, who, according to the company, had a previous relationship with one of the lawyers involved in the case.

The annulment is still being processed in the TJ-SP Business Law Chamber and is one vote away from being rejected, although there is room for declaratory embargoes. J&F obtained an injunction from Minister Mauro Campbell, at the STJ, to halt the trial in São Paulo. He claims there is another issue to be decided.

This is a challenge to the sentence of judge Renata Maciel, of the 2nd Business Court for Conflicts and Arbitration. She had won the case for Paper.

The Batistas holding company says that the magistrate could not have ruled on the matter due to the existence of a letter from judge José Carlos Costa Netto. This informed that no decision should be made because there was a conflict of competence to be resolved.

Renata raised the value of the case to R$6 billion, which means that, when everything is finished, there will be a bill of R$600 million to be settled with the lawyers.

Paper complained that, despite it being a trivial matter, to be decided in weeks, Costa Netto spent around a year with the case because of this. The origin of the conflict was a process opened by Jackson’s own company to present documents.

Another front, linked to arbitration, but with parallel developments, is the report of hacking and alleged threats received by Eldorado executives. J&F claims that thousands of emails dealing with the dispute with Paper ended up being leaked. Two investigations, in São Paulo and Diadema, were opened and archived.

The holding company took the case to Brasília. Last week, minister Daniela Teixeira, from the STJ, ordered the suspension of the archiving of the investigation originally opened in Diadema and the summons of those investigated.

J&F also filed a lawsuit against Cotrim for slander and defamation. In an interview with Sheet, the executive said that there was a request from the Batistas to pay an additional R$6 billion to reach an agreement. The executive won the case and last year was entitled to compensation of R$30,000.

But what really worries Paper at the moment is the same source of trust as J&F: the land issue. A subject that, at the time the sale was closed, in 2017 or early 2018, was never mentioned.

According to law 1,179, of 1971, foreign companies or people can only own land in Brazil if the area is less than 50 fiscal modules. The allegation is that Paper, in order to have controlling interest in Eldorado Celulose, should have requested authorization from the National Congress.

What currently blocks the transfer of shares is an injunction given by judge Rogério Favreto, from the TRF-4 (Federal Regional Court) in Chapecó, Santa Catarina, a state in which Eldorado does not have land. The company’s headquarters are in Mato Grosso do Sul, where another action with the same purpose is underway.

Incra (Institute of Colonization and Agrarian Reform) agrees with the thesis and sent a letter to Jucesp (Commercial Board of the State of São Paulo) and the CVM (Securities Commission) to prevent the transfer of share control.

Paper’s lawyers have already made different offers to the federal agency to try to change this view, without success. One of them would be the commitment to sell the land that belongs to Eldorado after a certain period. And, to close the purchase, Paper opened CA Investment, a company registered in Brazil.

For J&F, the opponent is in a difficult situation because, in the purchase and sale contract, it states in different clauses that it is legally able to take over the company. Which wouldn’t be true because of the land. And acknowledging the need for authorization from the National Congress would be admitting that she did not provide true information in the original contract.

According to Eldorado itself, it uses 230 thousand hectares of land to plant eucalyptus and needs wood from 80 thousand trees per day to produce cellulose. The company has 4,000 employees in the forestry area alone. Land leases vary from 14 to 16 years because two plantation cycles are needed for eucalyptus to pay off. Each one takes seven years.

It is a fight that has led the parties to exasperation. Paper considers that the holding company uses merely delaying resources and leads judges into error with incorrect information. J&F considers that its rival refused more than once to make an agreement and denies any inducement to error.

But there are different sentences in which judges and magistrates were angry with the Batistas.

Judge Renata Maciel complains about J&F’s action and mentions that there is no “way” to resolve the dispute, in reference to the popular expression of the “Brazilian way”. In the dispute at the STJ over the interruption of the arbitration annulment trial, the deputy attorney general of the Republic, Antônio Carlos Martins Soares, wrote that the Batistas holding company “resorts to procedural maneuvers detrimental to the postulate of good faith.”

Faced with the request to dismiss the case against Cotrim, the minister of the STF (Supreme Federal Court), Rosa Weber, wrote in a ruling that the appeal was “an abuse of the right to appeal”. The Public Ministry of São Paulo defined one of the investigations as “megalomaniac”.

Previously, judge Guilherme Cruz, from TJ-SP, had condemned J&F for litigation in bad faith. The same was decided by the rapporteur of the request for annulment in the Business Law Chamber, José Benedito Franco de Godoi, with the agreement of judge Alexandre Lazarini.

In an order, the PGR (Attorney General’s Office) called J&F’s procedural strategy of using shortcuts to obtain the annulment of unfavorable sentences reprehensible. It would be an attempt to mislead Minister Mauro Campbell

There is no sign that the dispute will end. Even some of the 90 lawyers involved in the dispute (45 on each side, not counting external consultants) believe that the decision is a long way off and will eventually be taken by the STF.

This is the reason why there is no excitement about sporadic victories. Even if the fight is fierce and in different areas.

This is also the reason why, every time a Paper lawyer goes to inform Jackson Wijaya of a favorable ruling, his reaction is laconic:

“OK. But where is my company?”