Material Fact São Martinho acquires stake in Santa Cruz and Agropecuária Boa Vista São Paulo, October 31, 2011 - São Martinho S.A. (BM&FBovespa: SMTO3; Reuters: SMTO3 SA and Bloomberg: SMTO3 BZ), one of the largest producers of sugar and ethanol in Brazil, announces the acquisition of 32.18% of Santa Cruz Açúcar e Álcool (Usina Santa Cruz) and 17.97% of Agropecuária Boa Vista S.A. Context of the Transaction A group of minority shareholders recently decided to sell their stake in Usina Santa Cruz and in its agricultural company -Agropecuária Boa Vista. Considering the high agricultural and operational synergy, the São Martinho group decided to acquire their stake and today it signed the documents necessary to implement the acquisition, under the terms approved by its Board of Directors. Usina Santa Cruz has very similar characteristics to São Martinho and adopts a state-ofthe-art model in the industrial and agricultural areas. Its indicators in critical success areas, such as mechanized planting and harvesting, are among the best in Brazil. It also has an energy co-generation project already in place and generating cash. Asset Details: Santa Cruz, located in Américo Brasiliense (a town approximately 45 km from São Martinho s largest Mill, located in Pradópolis), has a crushing capacity of 4 million metric tons of sugarcane and a 60%/40% flexibility of sugar and ethanol production. In addition, the industrial plant co-generates 240,000 MW/h, 175,000 MW/h of which has been sold under 15-year contracts at the current price of R$169/MW/h adjusted by the IPCA consumer price index.
One of Santa Cruz s major competitive advantages is its sugarcane supply. Currently, the unit operates with 90% of its own sugarcane, 42% (or 20,300 hectares) of which from its own land (belonging to Agropecuária Boa Vista S.A). OPERATING DATA 09.10 10.11 Grupo Santa Cruz (Combined) Crushed Sugarcane ('000 tons) 3,977 3,961 Own 3,579 3,565 Third Parties 398 396 Mechanized Harvest 83.0% 84.0% Mechanized Planting 66.0% 92.0% Production Sugar ('000 tons) 243 291 Ethanol ('000 m³) 151 149 Energy ('000 MWh) 194 225 FINANCIAL HIGHLIGHTS (R$ Thousand) 09.10 10.11 Grupo Santa Cruz (Combined) Gross Revenue 362 481 Net Revenue 340 456 Adjusted EBITDA 136 217 EBITDA Margin 40.1% 47.6% Consolidated Balance Sheet Indicators Net Debt 508 478 Net Debt / EBITDA (LTM) 3.73 x 2.20 x
OWNERSHIP STRUCTURE AFTER CONCLUSION OF THE TRANSACTION Luiz Ometto Participações S.A São Martinho S.A 55.31% Minority Santa Cruz S.A 32.18% 12.51% 45.23% 29.94% Minority Agropecuária BoaVista 17.97% 6.89% Transaction Details I- Acquisition of 32.18% of Santa Cruz S.A. shares and 17.97% of Agropecuária Boa Vista S.A. shares at R$187.4 million. The payment will be made in 3 installments (at the execution of the contract, 1 year and 2 years) without inflation adjustment, i.e., the net present value of the 3 installments totals approximately R$170 million. The amount assigned to 32.18% of Usina Santa Cruz S.A. shares (excluding the interest in the agricultural company Agropecuária Boa Vista S.A.) was R$55.5 million and net debt totaled R$519 million on the date the contract was signed. II- The amount assigned to the stake in Agropecuária Boa Vista (17.97% acquired directly and 14.55% acquired through Santa Cruz S.A, s interest) totaled R$131.9 million. Agropecuária Boa Vista has an area of 20,300 hectares that is used to supply sugarcane to Santa Cruz S.A.
III- Governance The Company and Luiz Ometto Participações S.A., the controlling shareholder of Usina Santa Cruz and Agropecuária Boa Vista, also entered into a Shareholders' Agreement, containing the usual provisions for this type of transaction, comprising the following matters: Preemptive Rights Shareholders will have preemptive rights for the acquisition of shares belonging to another shareholder. If São Martinho acquires Santa Cruz s control, it will pay the price partially or fully in shares directly and indirectly held in Agropecuária Boa Vista at current market price, maintaining land leasing and/or partnership agreements. Tag Along In addition to preemptive rights, shareholders will have the right to sell their shares under the same terms and conditions. Board of Directors The Board of Directors will be created and will comprise 5 members, of whom 2 will be appointed by São Martinho S.A, and 3 by Luiz Ometto Participações S.A. For strategic matters such as business and investment plan, strategic partnerships, sales, posting of bonds, etc., São Martinho will have special majority vote.
SYNERGIES São Martinho will have synergies with Santa Cruz in the following strategic areas: Agricultural/Sugarcane: The synergy in the agricultural area is extremely relevant to this transaction; currently, São Martinho s agricultural costs account for approximately 75% of sugar and ethanol production costs. Given that the sugarcane plantations are near the industrial units (with a distance of approximately 45 km on a straight line), we believe agricultural area synergies will be absorbed in the short term. As of the next harvest, we will maximize sugarcane Cutting, Loading and Transport, planting and crop treatment. Scale Gains: a) Joint purchase of inputs, agricultural and industrial services (scale); b) Uniformity and standardization of equipment and spare parts; c) Rationalization of agricultural and industrial equipment maintenance; d) Reduction in logistics costs in sugar and ethanol transportation; e) Synergies in the administrative structure; f) Joint production sales. Sincerely, João Carvalho do Val Chief Financial and Investor Relations Officer Felipe Vicchiato Financial and Investor Relations Manager Tel: 11 2105-4100 Email: ri@saomartinho.ind.br IR Website: www.saomartinho.ind.br/ir
About São Martinho The São Martinho Group is one of the largest groups in Brazil s sugar and ethanol sector, with three mills in operation: São Martinho in Pradópolis (in the Ribeirão Preto region of São Paulo state); Iracema in Iracemápolis (in the Limeira region of São Paulo state) and Boa Vista (Quirinópolis, GO). For more information please go to the website www.saomartinho.ind.br. This document contains forward-looking statements related to the business outlook, operating and financial projections and growth prospects of São Martinho. These statements are merely projections and as such are based exclusively on Management s expectations for the future of the business. These forward-looking statements depend materially on changes in market conditions and the performance of the Brazilian economy, the industry and international markets, and therefore are subject to change without prior notice.