Large commodity trading company Wilmar International Singapore has trumped the Bright Food Group China and bought the planned Chelsea Sugar Refinery Sucrogen spin-off, which includes majority control of the Chelsea sugar refinery in Auckland.

After months of negotiating with the Chinese company, CSR directors surprised the market yesterday with the announcement that it had accepted a $A1.75 billion bid from Wilmar. The planned demerger of Sucrogen will no longer go ahead . Investors immediately endorsed the offer, which is subject to overseas ownership approvals in both Australia and New Zealand.

The shares rose 4% to $A1.75, a gain of 6Ac. A big beneficiary will be GPG, which has a significant 5% shareholding in CSR. If successful, the deal is expected to net around $A1.6 billion, or $A1.06 a share for CSR, which will have a number of options to choose from to reward shareholders.

Shanghai-based Bright Food submitted its final bid of $A1.65 billion last Friday amid reports it had lowered its offer from its previous conditional bid of $A1.75 billion, first made in January, due to lower sugar prices. CSR chairman Ian Blackburne said the Wilmar offer was in the “best interests” of shareholders, valuing the sugar business at 14 times last year’s earning before interest and tax (ebit) and 23 times the division’s average earnings over the past decade.

He said Bright had been given “every opportunity” to revise its offer.”At the end of the day they couldn’t get there on value and certainty,” he said.

The merger will combine Sucrogen, the world’s eighth-biggest raw sugar producer, and Wilmar, the world’s largest listed palm oil producer. CSR announced its plan to split off Sucrogen, which also included some renewable energy interests, from its main building products business in October last year. In January, Bright Food announced that it wanted to hold discussions with CSR about an offer for the sugar business of no more than $A1.5 billion. While that process dragged out, CSR also had to fight off a legal threat to the demarger over concerns about asbestos liabilities. That case went to the Australian Federal Court on appeal, which overturned the initial thumbs down to the demerger.

The New Zealand Refining Co, which owns the Chelsea brand and refinery, is 75% owned by CSR with the remaining shares held by the Mackay sugar cane growers’ co-operative. Wilmar International is controlled by the Kuok family, one of the richest and most powerful in Southeast Asia.

Company chairman and chief executive Khoon Hong Kuok is the nephew of Robert Kuok, whose fortune is estimated at more than $US14.5 billion. Kuok Group’s interests ranging from sugar and rice trading to shipping, real estate and the Shangri-la Hotel chain. Known as Asia’s “sugar king,” Tobert Kuok invested heavily in sugar refineries in the 1960s and controlled 80% of Malaysia’s sugar market until he sold them last year to a government company.

In 2007, he merged his extensive palm oil interests stretching across Malaysia and Indonesia with Wilmar International, which is the second-largest company listed on the Singapore stock exchange and a capitalisation of more than $S30 billion.

-NBR, 6 July 2010

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