Wilmar International to take joint control of India’s largest producer of raw sugar for $ 200 m

Monday, 24 February 2014 00:00 - - {{hitsCtrl.values.hits}}

Mumbai: Singapore-based Wilmar International Ltd. has agreed to buy a controlling stake in Shree Renuka Sugars Ltd. – India’s largest producer of raw sugar – resulting in a total cash infusion of US$ 200 million, which will include purchasing shares from the public shareholders of the Indian company and subscribing to a proposed rights issue. Wilmar International will buy the stake through its unit, Wilmar Sugar Holdings Ltd. (WSH), in a complex deal involving two steps. “The first step would involve an investment of INR 5,170 million (approximately US$ 83 million) by WSH in Shree Renuka Sugars through a preferential allotment of 257.5 million shares of fresh equity shares to WSH at a price of INR 20.08 per share,” Wilmar International said in a statement. After the stock purchase, WSH will hold 27.5% of Shree Renuka Sugars’ expanded equity share capital. Following this, WSH will offer to buy as much as 26% of the expanded equity share capital of Shree Renuka Sugars from public shareholders at a price of INR 21.89 per share. The second step would involve Wilmar and the existing promoters of Shree Renuka Sugars jointly participating in a rights issue to raise up to a further INR 7,250 million of primary equity capital for Shree Renuka Sugars, the statement said. Both the rights issue and the open offer will be conducted jointly by Shree Renuka and Wilmar. According to the open offer documents, Wilmar’s stake can’t go beyond 49.9%. In 2009, Renuka acquired Distillery Valley Ivai SA (Renuka Vale do Ivai) for US$ 240 million. In the following year, it bought a 59.4% stake in Equipav SA (Renuka do Brasil) for US$ 250 million. Shares of Shree Renuka Sugars rose 3.69% to INR 22.5 on BSE, while the exchange’s benchmark Sensex fell 0.9% to close at 20,536.64 points. The announcement came after market hours. “This is a path-breaking move in the sugar business which would create a very strong partnership in some of the key global markets for sugar,” said Narendra Murkumbi, Vice-Chairman and Managing Director of Shree Renuka Sugars. “Wilmar’s leadership position in the edible oil business globally and its strong reach in several countries across the world would be synergistic with our large footprint in India and Brazil, the two largest sugar producers in the world.” Besides the benefit for his company’s sugar business, this venture will complement the development of edible oils and other businesses in India, said Kuok Khoon Hong, Chairman and Chief Executive Officer of Wilmar. Wilmar reported a profit of US$ 1.3 billion on a revenue of US$ 44.1 billion in fiscal 2013. According to the agreement, Shree Renuka Sugars will be jointly controlled by the current promoters and Wilmar, with both parties holding equal shareholding and board representation in Shree Renuka. “The existing promoters will continue with the management of the company, with Wilmar being actively involved in strategic decisions,” said the statement. Murkumbi said the deal is structured in such a way that promoters of the Indian company (the Murkumbi family) and Wilmar International will be holding the same equity stake at all levels. He said Shree Renuka will use INR 12,420 million to retire debt. Wilmar is represented in Sri Lanka through a Joint Venture with Pyramid and named as Pyramid Wilmar Ltd. Pyramid Wilmar Ltd.’s business activities includes merchandising and processing of palm and lauric edible oils, manufacturing of bakery shortening, fats and margarines for local and export market, manufacturing of small pack consumer edible oils and sugar trading. Pyramid Wilmar is also a shareholder of the Shangri-La Hotel projects in Sri Lanka, which are the two flagship strategic development projects with a high net value investment in Sri Lanka. Pyramid Wilmar’s latest venture was the strategic partnership it entered into with Sunshine Holdings and Tata Global Beverages to jointly own Estate Management Services Ltd., which is the holding company of Watawala Plantations PLC and Watawala Tea Ceylon Ltd.

Sugar margin changes by ICE since 2009

Reuters: ICE Futures US has raised margins for trading raw sugar twice this month amid mounting concerns that the worst drought in decades currently scorching in Brazil will delay crushing and damage the quality of the crop from the world’s No. 1 producer. The Atlanta-based exchange has increased the price of trading by $ 200, or 40%, since 5 Feruary. The spot raw sugar contract on ICE Futures US rallied 0.39 cent, or 2.4%, to settle at 16.72 cents a lb, after hitting 16.79 cents, its highest price since December.

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