SAo Paulo, April 8 - Santelisa Vale, one of Brazil's largest sugar and ethanol producer, agreed to sell a 40 percent stake for an undisclosed sum to Swiss-based trader Louis Dreyfus Commodities, a source with direct knowledge of the transaction said on Tuesday.

The companies should make a formal announcement later this week, said the source, who was not authorized to speak on the matter.

Santelisa's largest shareholders, the Biagi and Junqueira families, have already signed off on the deal, and other shareholders are expected to follow suit in the coming days, the source added.

Santelisa, saddled with 3 billion reais ($1.34 billion) of debt and some $300 million in losses on currency derivatives, has been looking for a strategic partner since late last year. The company had been in talks with Brazil's Cosan , private equity firm GP Investimentos , Bunge Ltd and Louis Dreyfus, among others.

Other large shareholders of Santelisa include U.S. securities firm Goldman Sachs and the investment arm of Brazil's state development bank BNDES.

As part of the transaction, BNDES will increase its stake in Santelisa to 20 percent from 7 percent, the source said. On Tuesday, O Estado de S.Paulo newspaper said the price of the additional shares would be 500 million reais.

The source would not confirm the value of the stake.

Louis Dreyfus did not immediately return calls seeking comment on the transaction. Santelisa, which has the capacity to process 17 million tonnes of sugar cane a year, declined to comment. ($1=2.236 reais)