Wilmar buys CSR's sugar arm for US$1.5b

SYDNEY/SINGAPORE: Singapore's Wilmar International is buying Sydney-based CSR's sugar business for US$1.5 billion (US$1 = RM3.22) in a surprise deal that trumps China's Bright Food Group and gives it control of more than half of Australia's raw sugar output.

CSR, the world's fifth-largest sugar-refiner, said yesterday Wilmar had agreed to buy its Sucrogen sugar arm, ending a year-long effort to either spin-off or sell the asset and pushing its share price up as much as 5 per cent in a weak broader market.

After a 150-year history in sugar, CSR is selling Sucrogen, a household name in Australia, to focus on its core building materials operations. Wilmar, the world's largest listed palm oil producer, is using the deal as a springboard for further expansion into sugar.

"This latest acquisition proves that Wilmar is well on its way to becoming a dominant global sugar player and will significantly raise the possibility of the injection of (Malaysian tycoon) Robert Kuok's sugar business into Wilmar," said Alvin Tai, an analyst at Malaysian brokerage OSK Group. Kuok is the uncle of Wilmar chief executive Kuok Khoon Hong.

The deal was also a coup for CSR which has been trying to demerge Sucrogen from its core building materials business for a year.

The CSR board over the weekend rejected a lower formal offer from China's Bright Food Group, which has been chasing CSR since the start of the year. One source close to Bright Food said the price agreed was A$1.68 billion (A$1 = RM2.71) and news of Wilmar's rival bid had taken it by surprise.

CSR chief executive Jeremy Sutcliffe, who was brought in to run the company in April due to his experience brokering major deals in the metals recycling sector, said Wilmar won the race with an offer at the "very last gasp. At the end of the day they (Bright Food) didn't quite get there in terms of price or certainty," he said.

UBS and Lazard advised CSR on the deal. Australia & New Zealand Banking Group advised Wilmar.

It was one of two major takeovers for corporate Australia yesterday after Centennial Coal Co Ltd agreed to a US$2 billion offer from Thailand's Banpu Public Co Ltd. The Australian government's watered down plans for a big mining tax late last week were expected to clear the way for a string of deals in the resources sector.

Wilmar's purchase price was A$1.347 billion for equity and A$403 million for debt, 6 per cent higher than a conditional A$1.65 billion offer Bright Food made to CSR's board late last week. Wilmar's shares rose as much as 2.3 per cent to S$5.88, (S$1 = RM2.31) outperforming a slight fall in Singapore's headline index.

"This is positive news as it'll help jump start their strategy to expand in the sugar business and (represents) the next growth driver for Wilmar," said DBS Vickers analyst Ben Santoso. He expected the new business to see synergies from capitalising on Wilmar's extensive distribution to China and Asia.

CIMB analyst Ivy Ng said the deal was positive in the medium term as it gave Wilmar knowledge to expand to other parts of Asia. "But in the short term, based on what they have so far it does not appear the acquisition will significantly increase their earnings," she said. "In the longer term, it would be good if they can replicate the business in other parts of Asia like China, India and Indonesia, but you won't see that tomorrow."

CSR said the deal was expected to be completed by the last quarter of 2010, and is conditional on approval by Australia's Foreign Investment Review Board. - Reuters

Leave a Reply