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Chile's Copec bids for Eldorado Brasil, source says

SAO PAULO, Brazil (From news reports) -- A unit of Chile's Empresas Copec SA has placed a bid for pulpmaker Eldorado Brasil Celulose SA, whose controlling family put it on the block after signing a plea deal with prosecutors in Brazil, a person directly involved in the bid said on Friday.

According to the person, who asked for anonymity as terms of the bid remain private, Eldorado Brasil is also a target of interest from Brazilian pulp producers Suzano Papel & Celulose SA and Fibria SA, which have been lured by potentially significant cost savings from an acquisition.

While a deadline for the bidding is unclear, Copec's Arauco unit made an offer to Brazil's billionaire Batista family for their stake in Eldorado earlier this week, the person said. The Batistas own 81 percent of Eldorado through investment holding company J&F Investimentos SA.

With debt hovering around 8 billion reais ($2.4 billion) currently, Eldorado is one of J&F's flagship assets put up for sale after brothers Joesley and Wesley Batista were ensnared in a corruption scandal, sources told Reuters last month. Eldorado's lenders are also pressing for a sale.

A representative of Santiago-based Copec could not be immediately reached for comment. J&F, Fibria and Suzano did not have an immediate comment.

Buying Eldorado could allow Copec to expand in Brazil, where lawmakers have discussed easing sales of land to foreign investors. For global pulpmakers, buying land in Brazil offers strategic advantages, such as greater soil productivity than in places like Scandinavia and Chile.

Shares of São Paulo-based Fibria gained 0.8 percent and Suzano's Class A preferred shares rose 1 percent in early Friday trading. Shares of Copec have gained 2.2 percent this week after newspaper Valor Econômico first reported the Chileans' plan to bid for Eldorado.

Valor reported earlier on Friday, citing a person familiar with the talks, that Copec's non-binding offer valued Eldorado at 11 billion reais. According to Valor, a deal is imminent and may be announced this weekend.

The family ownership structure of Brazilian pulp and paper firms has for years stood in the way of a wave of sector consolidation, as owners have resisted sharing control.

Seven pulp and paper M&A deals have taken place in Brazil since the start of last year, compared with 11 each in Sweden and Indonesia, and 54 in the United States.

A decision on which company will hold exclusive talks with the Batistas for their stake is "around the corner," the person said. A conclusion of the deal may take a long time though, because a buyer "will not spare Eldorado from a rather stringent due diligence procedure," the person added.

Brazilian pension funds Petros Fundação and Funcef Fundação dos Economiarios own the remaining 19 percent of Eldorado.

Joesley and Wesley Batista, the family members who last month entered a plea deal with Brazilian prosecutors, said Brazilian President Michel Temer was involved in a corruption scandal. Temer has repeatedly denied the accusations.

Earlier this month the government ordered state-controlled lender Caixa Econômica Federal to stop providing financing to the Batista family, Reuters reported on June 7, citing people familiar with the decision. A source described the move as "retaliation."

Uncertainty surrounding the plea deal hampered Suzano's interest in Eldorado, Valor said. Fibria SA, the world's No. 1 eucalyptus pulpmaker, could bid for Eldorado as early as Friday, Valor reported, without saying how it got the information.

The investment banking units of Itaú Unibanco Holding SA and Banco Bradesco SA are advising Suzano on a bid for Eldorado, according to Valor. Morgan Stanley & Co is Fibria's advisor, the person said.

Copec's Arauco is being advised by Banco Santander Brasil SA and law firms Simpson Thatcher & Bartlett LLP and Mattos Filho Advogados.

The banks did not have an immediate comment.

Valor said earlier this week that Fibria seemed the least likely suitor because a key shareholder, state development bank BNDES, would not approve a deal that could shore up the Batistas.

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