UPDATE: Louis Dreyfus Considers Brazil Sugar IPO Or Merger -Source

Louis Dreyfus Commodities is considering a merger or a public listing of its sugar-production arm in Brazil to more than double its capacity there, a person familiar with the matter said Monday.

The Geneva-based trade house has hired J.P. Morgan and Brazil's Banco Bradesco to advise it on whether to publicly list LDC-Sev on BM&F Bovespa (BVMF3.BR) or to merge it another company, the person said.

The company will "have to decide by the end of the year and will probably implement by the middle of next year," said the person, who estimated LDC-Sev's value at $3 billion.

Sao Paulo-based LDC-Sev is the product of a 2009 merger between LDC Bioenergia and Santelisa Vale. It has 13 plants in Brazil, the world's top sugar producer, and has a total crushing capacity of 40 million metric tons of sugarcane.

The goal of the initial public offering or merger would be to generate enough capital to increase its capacity to 100 million metric tons, the person said.

The person didn't give a time period for the expansion and said it was unclear how much capital would be required.

Representatives at J.P. Morgan in Sao Paulo and Bradesco weren't immediately available for comment.

Analysts have said demand for sugar, among other commodities such as corn, is increasing globally.

"As the emerging markets like China and India, as they increase in affluence, the trend is to have a richer diet, so sugar consumption should be on the rise," said Michael McDougall, a senior vice president at brokerage Newedge.

Late Sunday, the Financial Times reported Louis Dreyfus Commodities had hired Credit Suisse Group (CSGN.VX) to advise the privately held trading house on a partial sale to a sovereign-wealth fund or a potential listing.

However, the person familiar with the matter said a public offering in the next two years is a "long shot."

"The market is not favorable," the person said. "Just look at the equity markets."

Louis Dreyfus Commodities generated a profit of $1 billion last year on $46 billion in revenue. The person said the company is "generating a lot of cash and is pushing back the need to raise capital because it's financing its growth by itself."

The person also confirmed that Credit Suisse is advising Louis Dreyfus, but that if it moves forward with an IPO, several banks would be involved.

Another person familiar with the situation said: "There has been talk [of an IPO] on and off about for two or three years. It wouldn't surprise me that there is a new rumor, and it wouldn't surprise me if the rumor is false."

Louis Dreyfus Commodities is one of the largest agricultural commodity traders in the world, along with Archer Daniels Midland Co. (ADM), Singapore-listed Olam International (O32.SG), Bunge Ltd. (BG), and privately held Cargill Inc.

-By Leslie Josephs, Dow Jones Newswires; 212-416-4055; leslie.josephs@dowjones.com

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