S&P’s Take on Suzano’s Financial Future Following International Paper Bid

In a bold move, Suzano, the titan of the pulp industry, plans to secure its financial footing by acquiring International Paper for over $15 billion.

This step, although risky, could maintain its prestigious investment-grade status, a beacon of fiscal health first achieved in 2018.

Currently, Suzano is negotiating with banks to finance this bid. Some investors fear this could downgrade its credit rating.

Yet, S&P Global Ratings suggests otherwise. “The acquisition at this preliminary stage would not necessarily result in a downgrade,” clarifies analyst Fabiana Gobbi.

This merger would escalate Suzano’s debt to five times its earnings before interest, taxes, depreciation, and amortization—a sharp rise from the usual 3.5 times.

Despite the high stakes, a well-defined plan could stabilize Suzano’s finances within three years, ensuring its credit remains intact.

This deal would also diversify Suzano’s business, significantly reducing earnings volatility.

This is crucial as 90% of Suzano’s revenue comes from pulp—a market subject to fierce price swings.

Suzano’s current net debt stands at about $12 billion. They promise stakeholders to avoid any transactions that could jeopardize their rating.

However, International Paper initially declined Suzano’s $42 per share offer, nearly valuing the American firm at $15 billion. Insiders suggest a higher bid may be necessary as negotiations continue.

S&P’s Take on Suzano’s Financial Future Following International Paper Bid

The strategy mirrors Suzano’s past acquisitions, like the $11 billion Fibria deal in 2018, which didn’t affect its rating.

Such maneuvers involve slashing costs and selling non-essential assets to manage debt more effectively.

Furthermore, Suzano is not known for hasty decisions. Its recent acquisition of a 15% stake in Lenzing after lengthy negotiations underscores its methodical approach.

This strategy, coupled with new operations slated to increase pulp production by 20% by 2025, positions Suzano well to manage its ambitious financial commitments.

Related coverage: Investor Confidence Wanes in Brazil's Economy, BofA Survey Indicates · Argentina's Soy Exports Surge to Highest Volume Since 2020 · Wednesday's Morning Call: All Eyes on Copom Decision · Morgan Stanley's Strategic Wins Amid Brazil's Market Turmoil

More: Brazil news in English, every day from The Rio Times.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.