E Stock Picks For 2021

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Brazilian Cosan, a company in the sugar cane refining and logistics business whose ADR we used to own, is in the process of consolidating its offshore companies into the Brazilian parent to improve the groups valuation. We sold in part because its accounts were incomprehensible because of the complex of holdings. As is usual with Cosan they sent out a shareholder notification of the proxy vote to approve the proposed changes on which a vote is being held--but described the holdings to be incorporated only in Portuguese. Luckily your editor is a former student of the Fundaçäão Gulbenkian where you can study Portuguese.

The essentials of the incorporation were to take control of Cosan Ltd, a registered entity in Hamilton, Bermuda under legal terms and conditions proposed by Cosan's special independent committee in a meeting August 4 based on a directive of Sept. 1, 2008 (when we still owned the company but were not consulted. This results in a deed of merger under the terms of the Bermudas companies act which was validated by legal counsel.

A further incorporation of Cosan's separate São Paulo logistics arm, Cosan Logistica S.A. by way of a share swap also authorized by the special independent committee. It was also validated by the lawyers.

Now without translation US ADR owners of (CZZ) are being asked to approve this complex matter.

I assume there will be some problems and I have put in an order to buy CZZ at a level barely higher than its Friday close. Portuguese speakers already boosted the share price by 0.62% last week. It trades at a p/e ratio of 15x, an earnings ratio which may be historic now and yields 0.6% in dividends, also no longer accurate as it is ceding shares to the two newly incorporated entities.

I think this is a possible bargain given that the point of the incorporation is to improve the standing of CZZ parent, but given that this is an obscure Brazilian tangle, it may not be for that reason.

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Vivian Lewis 4 weeks ago Author's comment

I wrote it