CSR settles on Wilmar for sugar sale

CSR Ltd put the recent uncertainty about its sugar and energy unit Sucrogen behind it on Monday, agreeing to sell the business to a Singapore-based group for $1.75 billion.

While the price was in line with valuations among market analysts, the identity of a buyer came as a surprise, given reports of Chinese Bright Food Group being close to a deal after months of negotiations.

Instead, the CSR board on Friday accepted an offer from Wilmar International Ltd to buy Sucrogen, the largest producer of raw sugar in Australia.

CSR managing director Jeremy Sutcliffe said the company had been in discussions with Wilmar for about six weeks.

Asked why the board chose the Singaporean company's over the one from Bright Food, Mr Sutcliffe said the Wilmar offer provided greater value and certainty.

He said dealing with Singapore's second largest company, and one with "extensive cross-border experience" in mergers and acquisitions "enabled a very seamless path to the transaction.

"Bright completed their due diligence, but ultimately at the end of the day they couldn't quite get there on value and certainty," Mr Sutcliffe told journalists during a conference call on Monday.

CSR had confirmed as recently as June 21 that it was continuing talks with Bright Food Group over its proposal to acquire the Sucrogen business.

A newspaper report said Bright had offered $1.65 billion for Sucrogen on Friday, but Mr Sutcliffe declined to confirm the amount during the conference call.

Patersons Securities research analyst Ben Kakoschke said while the identity of the buyer came as a surprise, the price paid was in line with the increased conditional offer that Bright Food made in April and his own valuations.

CSR has been keen to separate its two different operating businesses - sugar and energy, and building products.

In addition to taking offers from the market, CSR had also gone down the process of demerging the sugar and energy business.

A proposed demerger was initially struck down by the Federal Court in February, but was later overturned on appeal.

Wilmar, which has a market capitalisation of about $31 billion, said it would use the Sucrogen acquisition to build "a significant sugar business, utilising its proven integrated agribusiness model to replicate its success in other agri-commodities".

"The acquisition of Sucrogen will jump-start this strategy to expand into sugar," Wilmar said in its own statement on Monday.

The market cheered the news, with CSR stock the second best performer on the S&P/ASX100 on Monday, climbing 3.54 per cent, or six cents, to $1.755.

IG Markets market strategist Ben Potter said the sale provided certainty for shareholders after months of negotiations with Bright Food.

Mr Sutcliffe said CSR was mulling over a number of options for the $1.6 billion net proceeds expected as part of the sale.

These included a special dividend, share buyback or capital return.

"We've just got to run a very careful pen over those options to make sure we get the balance right," Mr Sutcliffe told journalists during a conference call.

Mr Kakoschke said the company may also look to bulk up its building products business.

"The market is generally quite weak for building products, maybe they could make a good acquisition out there which would drive some growth," Mr Kakoschke said on Monday.

The Sucrogen sale, which required Foreign Investment Review Board approval, as well as the green light from the Overseas Investment Office in New Zealand, was expected to be completed by the end of the year.

The Australian Cane Growers Council said the sale to Wilmar was met with collective surprise by the sugar industry and its stakeholders.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

• Bookmark this page
• Share this article
  •  
  • facebook
  • slashdot
  • digg
  • Reddit
  • stumbleupon
  • linkedin
  • twitter
• Got more on this story? Email CIO
• Follow CIO on twitter

• Share
  Share this article

  •  google+
  • facebookfacebook
  • slashdotslashdot
  • diggdigg
  • RedditReddit
  • stumbleuponstumbleupon
  • linkedinlinkedin
  • twittertwitter
• print
• email
• Bookmark