Joint venture is a contractual understanding between one or two parties in order to put to death a peculiar concern or undertaking in order to maximise the net income of the concern. It has common apprehension between the parties to portion the net incomes or losingss of the project concern.
Joint ventures are co-operative of concerns in which two or more companies joined together. The companies on come ining the joint venture may organize a separate corporation or partnership. There are besides some instances where the concern entity retain their ain individualism, while come ining into joint venture understanding which is operated as a separate entity wholly.
What Happens In a Joint Venture?
During the procedure of joint venture the two companies should make up one’s mind the footings and status of the venture.
The footings are decided in order to acquire the benefits every bit by all the companies in the joint venture.
When a joint venture is formed the parent companies pool together in agreement resources like capital, human resources, net incomes hazards etc.
They portion concern expertness, engineering, distribution channels and sometimes, even clients.
Joint ventures are normally viewed as strategic confederations.
Benefits of joint ventures:
The chief advantages of joint venture, where the two companies combines their engineering and research which helps them to cut the cost of research and better the quality.
The pooling in of human endowment besides helps to increase the efficiency of the concern.
All the economic and fiscal hazards are shared by the companies in the joint ventures.
There is greater fiscal support among the companies, which helps them to better the public presentation of the company and maximise the net income of the company.
Joint Venture Trends:
Harmonizing to Ian Hewitt, “ the primary end of joint ventures is to organize cross boundary line confederations to function turning markets ”
As companies focus on their nucleus aims, and they fail to concentrate on their engineering and invention of new merchandises.
To make full these spreads of engineering, joint ventures are the best manner for the company.
Ex-husband: ‘ X ‘ a company with all resources such as land, labor and capital but does n’t hold latest engineering which helps to better the criterion of the merchandise, so it enters joint venture with the company ‘Y ‘ which has all latest engineering but without resources like labor, topographic point etc. So the both company Ten and Y made joint venture in order to accomplish success in their field.
Types of Joint Ventures:
Joint Ventures
Equity Joint Ventures:
It is the joint ventures in which separate concern entity was formed and the capital was contributed by all the spouses involved.
Non-equity joint ventures:
In this type, the capital was non contributed by the parties to organize separate entity. Alternatively, they made understanding to portion their resources among the companies. It is besides called invariable contractual understandings.
Joint ventures of Shell:
In August 2010: Shell International Petroleum Company Limited and Cosan S.A. signed joint venture: Raizen
The undertaking is to bring forth and commercialize ethyl alcohol and power from sugar cane and administer a assortment of industrial and transit fuels through a combined distribution and retail web in Brazil. It will develop the concern chances to bring forth and sell ethyl alcohol and sugar globally. The value of the undertaking is US $ 12-billion.
Cosan Ltd:
It is a keeping company. It involved in the production of ethyl alcohol and sugar, the distribution and selling of fuel and lubricators in Brazil. It besides involved in logistics services in Sao Paulo, Brazil. It produces, sells imports and exports sugar, sugar cane, other sugar byproducts and ethyl alcohol. It besides involved in the distribution of fuel and other fuel byproducts. It produces and markets electricity, steam and other co-generation byproducts. The company is running the operation through Cosan, Cosan Alimentos S.A and Cosan Acucare Alcool S.A. ( CAA ) .
Acquisition of Cosan Ltd:
On June 17, 2009, the Company completed the acquisition of Teacu Armazens Gerais S.A. ( Teacu ) . On November 12, 2009, the Company completed the acquisition of 14.28 % involvement in Logispot Armazens Gerais Ltda. ( Logispot ) . On November 24, 2009, the Company completed the acquisition of 26.7 % of TEAS ‘s capital. On June 17, 2009, the Company sold its air power fuel concern to Shell Brasil Ltd
Joint ventures between Shell and Cosan Ltd:
Deal Rationale:
Joint ventures of these two companies will do them to accomplish leading in their several nucleus concerns.
Shell is the planetary leading energy and petrochemical provider and Cosan is the universe taking manufacturer of sugar cane ethyl alcohol and sugar manufacturer.
These JV helps to develop the production of sugar and biofuels
These JV helps to develop the fuel distribution concern in Brazil with the one-year production of
Over 2 billion liters of ethyl alcohol
Shell part at IOGEN and CODEXIS will take the JV to a alone place in the production of sugar cane ethyl alcohol
These JV helps to develop the Biomass engineering between shell and cosan
The value of the portion will besides increase due the joint venture
Transaction Overview:
Capital Structure of Joint Venture:
Shell
Cosan
Management Company
Cosan 51 % Shell 51 %
Downstream Co
Sugar, Ethanol Co-generation
Contribution of Cosan and Shell towards Joint venture:
Cosan
Shell
Entire part -US $ 4,925 Million
Entire Contribution – US $ 4,925 Million
Sugar and Ethanol Assetss
Cash Contribution of $ 1,625 million
Sugar cane oppressing capacity: presently ~60 million metric tons per annum from 23 Millss
Brazilian downstream assets, including ~2,740 branded retail sites, supply and distribution assets, and the air power fuel concern, including the one late acquired from Cosan
Ethanol production capacity: A presently & gt ; 2 billion liters per annum ; A
ItsA portion involvement in Iogen Energy ;
All Co-generation workss
Its 14.7 % portion involvement in Codexis.
Brazilian downstream assets, including ~1,730 retail sites, and supply and distribution assets ; A A A
Ethanol logistics assets
Net debt of about US $ 2.5billion
Extra debt of R $ 500 million from BNDES
Assetss non being contributed:
Cosan
Shell
Rumo
Exploration and production concerns
Stake in Radar
Gas and power concerns
Fabrication and selling of its lubricator concern
Fabrication and selling of its lubricator concern
Future cogeneration assets
Shell trading concern
Retail Brands DaBarra and Uniao
Shell trade name
Scope of the Joint Venture:
Addition in the production and sale of sugar cane ethyl alcohol and ethanol based merchandises in Brazil
Continuing development in first coevals engineering in Brazil and 2nd coevals engineering in international partnership
Addition in the production and sale of steam, electricity and other co-generation merchandises in Brazil
Growth in the distribution, commercialisation and retail gross revenues of fuel merchandises and air power fuels in Brazil
The one-year production capacity of about 2 billion liters and important growing aspirations, the JV is milepost for the production of ethyl alcohol in the universe. The graph below shows the Shell and Cosan joint venture is comparable to 1/8th of current ethanol production signifier sugar cane as of 2010 -2019.
Benefits originating from the joint ventures of Cosan and Shell Ltd:
Increase competition in the fuel and biofuels industry in worldwide
More entree to ethanol market
Shell ‘s involvements in Iogen energy and Codexis, which make the venture to develop following coevals biofuels engineerings.
Constructing a alone platform for the 2nd coevals engineering
Upgrading of debt ratios by increasing the capital which inturn increase the hard currency flow
Improved concern intelligence
Entree to the highest criterions in corporate managerment
The undertaking helps to bring forth electricity from sugar cane
Remarks:
Harmonizing to Mark Williams, Shell Downstream Director “ The proposed joint venture is set to pool our complementary concerns, heighten our growing chances in ethanol production globally and back up our growing platform for our retail and commercial fuels concerns in Brazil ”
“ Over the following 20 old ages, sustainable biofuels are one of the most realistic commercial solutions to cut down CO2 emanations from conveyance. ”
“ While there is still plenty of integrating planning to make before we launch the proposed joint venture, this is an of import milepost in our attempt to make one of the universe ‘s most competitory sustainable biofuels companies, ” said Rubens Ometto Silveira Mello, Cosan ‘s Chairman of the Board and non-executive Chairman-elect of the proposed joint venture.
