Wilmar International Ltd, the world’s largest palm oil trader, agreed to buy CSR Ltd’s sugar unit for $1.5 billion, beating China’s Bright Food Group’s bid for Australia’s biggest refiner.
The offer includes A$1.35 billion in cash and A$403 million in assumed net debt, Singapore-based Wilmar said on Monday in a statement. Sydney-based CSR is the world’s second-largest exporter of raw sugar and Australia’s number one producer of sugar-based ethanol and renewable energy generator from biomass.
Buying Sucrogen will give Wilmar mills that produce 45 per cent of Australia’s raw sugar and account for about 4 per cent of global trade. Wilmar’s Chief Executive Officer Kuok Khoon Hong, said the purchase will help his company’s plans to expand sales in Indonesia and other Asian nations.
“They’ve been talking about growing their own plantations in Indonesia” to take advantage of rising demand, Carey Wong, an analyst at OCBC Investment Research, said from Singapore. “This deal gives them a foot in the door a lot faster.”
Wilmar, which expects the transaction to boost earnings from the first year, gained 2.3 per cent to S$5.88 on the Singapore stock exchange while the Straits Times Index was little changed at 2,844.84 as of 2:35 pm (local time). CSR rose 3.5 per cent to A$1.755 on the Australian stock exchange at the 4:10 pm (Sydney-time) close.
The cost of insuring CSR’s bonds from non-payment fell the most in almost two months. Credit-default swaps on CSR dropped 13 basis points to 69 basis points as of 3:57 pm in Sydney, the biggest decline since May 10, according to Nomura Holdings Inc and CMA DataVision. The swap contracts typically fall as perceptions of credit-worthiness improve.
Bright Food Group, Shanghai’s biggest food company, raised its initial conditional offer for CSR’s sugar unit to A$1.75 billion in April. It intends to trim the bid to between A$1.65 billion and A$1.7 billion, the Australian Financial Review said on Monday, citing unidentified people close to the deal.
The Sucrogen sale was completed at an earnings before interest, tax, depreciation and amortisation multiple of 9.7 times.
