Thursday, May 19, 2011

Tully Sugar Takeover Tussle

The Australian today has good coverage of the three way takeover tussle for Tully Mill. Shareholders yesterday voted in favour of a constitutional change which would allow a takeover. The change had previously been defeated with a blocking vote from Qld Sugar. A takeover would inject a healthy amount of cash to growers and the local economy.

Sugar growers voted in favour of a change to Tully Sugar's constitution, which will allow any one individual shareholder to own more than 20 per cent of the company's shares.
The three bidders for Tully -- Bunge, Cofco and Mackay Sugar -- all had offers of $41 a share on the table, but yesterday's vote signals that the takeover battle is now on in earnest.
Bunge Australia chairman Christopher White, who was at the meeting yesterday, immediately announced that his company would be increasing its offer to $42 a share and would include various sweeteners such as flexible acceptance, which allows shareholders to accept a higher offer if they so desire.
The new offer values Tully Sugar at $130 million.
Mr White told the meeting Bunge still wanted to win, and he invited the shareholders to a nearby pub for a reception.
He said the Tully mill was the best in north Queensland.
"We saw it as the crown jewel when we surveyed the landscape," Mr White said.
Although Bunge is an international company, it is using a local firm of solicitors, Pohlmann and Spicer, as a place where acceptances can be dropped off.
Mackay Sugar was also active at the meeting, telling the 320 growers who make up about half the shareholdings that it had formed a partnership with global sugar giant Louis Dreyfus, which is loaning it $102m for the bid.
Cofco has indicated that it may consider changing its bid.
Industry adviser John Amies has said Cofco ownership would allow the mill to expand and Tully growers to boost their businesses.
He said Cofco would be open to dialogue with Mackay Sugar about its bid proposal but said there was nothing to talk about with Bunge at this stage.
Cofco representative Honghuan Pan said Cofco was interested in buying the north Queensland mill because the company wanted to learn from the Tully mill's extensive operational experience to help inform its own nascent milling businesses in China.
Mackay Sugar chief executive Quinton Hildebrand said the company had a 10 per cent stake in Tully Sugar already and would be working to increase it.
"I'm confident we are a good cultural fit with the growers of Tully," Mr Hildebrand said.
All three major bidders are expected to change their offers over the next few weeks.
While Tully mill is one of the largest mills in north Queensland, crushing up to 2.5 million tonnes annually, the industry is going through a period of rationalisation and sugar industry observers feel several other mills may come into play once Tully is sold.
At the moment, Cofco has contracts on almost 20 per cent of Tully Sugar shares, which is conditional on Foreign Investment Review Board Approval.
Mackay Sugar has recently increased its shareholding to nearly 10 per cent and Queensland Sugar Limited, the sugar marketing body, has 20 per cent.
QSL has the potential to be the king maker in the deal. Its chairman, Alan Winney, said it would probably sell its shares, although it had not yet decided to whom.
Mr Winney said he had been unimpressed with Bunge's bid.
Tully Sugar chief executive John King said the race for the mill had just begun.
"Hang on to your hats. This is not a Black Caviar race -- it's not a short one, it's a Phar Lap one," Mr King said.

No comments:

Post a Comment