Brazil’s Supreme Court calls for conciliation as new developments unfold in the dispute over pulp producer.
The ongoing dispute between J&F Investimentos and Paper Excellence over Eldorado saw significant developments on Monday (18). The Administrative Council for Economic Defense (CADE) ordered the suspension of Paper’s rights in the pulp producer, marking another victory for brothers Joesley and Wesley Batista. Meanwhile, the Federal Supreme Court (STF) facilitated a conciliation procedure, signaling both parties’ interest in resolving the legal battle.
During a hearing with Justice Kassio Nunes Marques, the Supreme Court’s rapporteur for the Eldorado case, Paper reiterated its disinterest in owning land in Brazil. Conversely, J&F indicated its willingness to propose the purchase of all shares held by Paper—a proposal previously rejected by Paper. J&F stated that the deal would occur “at market value,” without specifying further, and claimed to have the necessary funds available.
Last week, the National Institute of Land Reform and Colonization (INCRA) closed an administrative proceeding on the matter, affirming that companies controlled by foreigners can only purchase or lease rural properties in Brazil with prior approval from the agency and Congress.
In light of this, Paper submitted a formal proposal to the Supreme Court—previously presented to INCRA—pledging not to hold rural properties in Brazil “once it gains control of Eldorado.” Paper—owned by Indonesian businessman Jackson Wijaya—expressed confidence that the federal government could resolve the issue and address any concerns raised.
In contrast, J&F confirmed readiness to offer Paper a proposal for acquiring the pulp maker’s shares, ensuring high returns on investment and freeing Eldorado from the litigation initiated seven years ago by the foreign company. This move could restart investments and job creation.
The Batista brothers’ holding company seeks to annul the purchase agreement signed in September 2017. Although Paper, which currently owns 49.41% of Eldorado, won an arbitration case against its partner, it continues pursuing the deal completion to acquire control shares.
The antitrust regulator’s measure prevents Paper from voting in meetings and participating in other decisions regarding Eldorado. This move responded to a request from the pulp producer, which accused the minority shareholder of alleged anti-competitive practices.
With the decision, Paper, which already had limited influence in Eldorado due to its minority stake and the suspension of the coordinating body allowing some input in strategic decisions, also loses veto rights on critical matters such as changes to the articles of incorporation, acquisitions, asset transfers, and expansion investments. A shareholder agreement guarantees these veto rights.
Paper plans to appeal to CADE’s tribunal to overturn the preventative measure and is already working on the appeal. The representation from Eldorado requesting the preventative measure was signed by lawyer Luiz Hoffmann, who was a member of the antitrust regulator until October last year.
“Among the reasons investigated, as per competition law, are creating obstacles for the operation or development of a competing company,”
stated the antitrust watchdog, noting that the measure aimed to protect collective welfare, public interest, and the principles of free competition in the pulp market.
“The scenario presented in the investigation could cause harm in the pulp market, leading to a reduced supply, price increases, and an artificially competitive environment due to barriers imposed on a competitor’s effective operation,” the CADE informed. The preparatory procedure was converted into an administrative inquiry “given evidence of economic order violations.”
Members of the antitrust regulator’s tribunal interviewed by Valor expressed differing opinions on the decision’s merits. One faction believes the measure should be overturned, citing no competitive reasons for the preventative action, while others identified technical arguments supporting the measure.
Timing is also an issue: there are only two regular sessions left this year for potential analysis by CADE’s tribunal if an appeal is filed. The agency’s president could call a special session to review the case.
J&F declined to comment on CADE’s decision when contacted. Paper expressed disappointment over J&F’s attempts to use Eldorado Celulose to manipulate CADE, as it allegedly did with other regulatory and oversight bodies, with no success.
According to Paper, the allegation of causing “financial and competitive harm” to Eldorado is “unfounded and illogical.” “Unfounded because it uses the argument of alleged competitive harm to interfere with Paper’s shareholder rights, a strategy unprecedented in Brazilian law. Illogical because it assumes that a shareholder owning 49.41% of the capital and striving for 100% of Eldorado’s capital for six years would act against the company’s interests,” the note stated.
Paper further announced plans to invest an additional R$20 billion to double the production capacity of the Três Lagoas plant, in Mato Grosso do Sul, by constructing a second production line upon gaining control of Eldorado.
“Paper believes there was a significant misunderstanding in CADE’s Superintendence-General decision and will take all necessary measures to clarify and reverse such injustice,”
it added.
Source: Valor International
