Shell and Cosan are advancing talks to recapitalise their Brazilian joint venture Raízen, with private equity funds managed by Banco BTG Pactual set to acquire a significant stake in the company’s fuel distribution arm for approximately $1.05bn, Bloomberg reported.

The proposed transaction forms part of a broader restructuring aimed at stabilising Raízen’s balance sheet after rising borrowing costs, weaker-than-expected harvests, and heavy capital expenditure strained liquidity.

Under the plan, Raízen would separate its sugar and ethanol production unit, Raízen Energia, from its fuel distribution business. Approximately 35% of the company’s debt could be converted into equity. Asset sales and share offerings would provide potential exit routes for creditors and bondholders.

Current shareholders are considering a capital increase of R$3bn to R$5bn, equivalent to roughly $570m to $950m. Shell may inject between R$1.5bn and R$3.5bn, while Cosan could contribute R$1bn. Cosan founder Rubens Ometto is expected to invest an additional R$500m.

UBS BB Investment Bank previously estimated Raízen may require R$20bn to R$25bn in fresh capital to restore financial stability.

The recapitalisation effort underscores growing private equity participation in complex emerging market restructurings, particularly where energy and infrastructure assets face cyclical and financing pressures. The deal would also mark a significant strategic investment by BTG-managed funds into Brazil’s downstream fuel distribution sector.

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