05/07/2010 - 10:08

CSR shares up on sweet sale to Singapore

05/07/2010 - 10:08

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Shares in building products, sugar and energy group CSR Ltd rose strongly on Monday after the company said it had found a buyer for its sugar and renewable energy business for $1.75 billion.

CSR shares up on sweet sale to Singapore

Shares in building products, sugar and energy group CSR rose strongly on Monday after the company said it had found a buyer for its sugar and renewable energy business for $1.75 billion.

Sucrogen, which is the largest producer of raw sugar in Australia, will be sold to Singapore-based agribusiness group Wilmar International, CSR said in a statement on Monday.

Wilmar International, 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.

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

IG Markets market strategist Ben Potter said the sale was good news for shareholders, as some in the investment community had valued the sugar business at $1.5 billion.

"This look to be a very good price for shareholders, as well as providing certainty after months of negotiations with China-based Bright Food Group," Mr Potter said in a research note.

AT 1100 AEST, CSR stock was up 6.5 cents, or 3.83 per cent, at $1.76.

The company had been working towards a planned demerger of its sugar and renewable energy business, with a proposal expected to go before shareholders in August, but the demerger process has now been deferred until December 31.

"If for any reason the sale cannot be completed, CSR may seek to proceed with a form of demerger," the company said.

The shareholder vote was initially blocked by the Federal Court in February this year due to concerns about the company's ability to fund its asbestos compensation liabilities should CSR be split.

But the court's judgement was overturned on appeal in April by the full bench of the Federal Court.

The sale required Foreign Investment Review Board approval, as well as the green light from the Overseas Investment Office in New Zealand, CSR said.

It was expected to be completed by the last quarter of 2010.

CSR said the company was "evaluating a range of capital management options" for the $1.6 billion net proceeds of the sale.

"CSR will also review a variety of strategic opportunities over the coming months and capital management decisions will be made following this review," the company said.

"In evaluating these options, CSR continues to accept its responsibilities with respect to its asbestos liabilities and will maintain a responsible capital structure to support its future obligations."

CSR chairman Ian Blackburne said the sale of Sucrogen achieved CSR's objective of separating its two different operating businesses.

"We have been working towards this objective for some time and having explored a number of strategic alternatives, the board believes a sale to Wilmar is in the best interests of shareholders and stakeholders in CSR," Dr Blackburne said.

Wilmar chairman and chief executive Kuok Khoon Hong said Sucrogen was a "good strategic fit" with the company's existing portfolio of agricultural products.

CSR executives are scheduled to hold a conference call with journalists about the deal at 1130 AEST.

 

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