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Danisco close to concluding sugar negotiations

By Jess Halliday , 23-Jun-2008

Danisco has said it is close to concluding negotiations with potential buyers of its sugar business, but is still working towards spinning it off into a separate business by the end of 2008 in case a suitable deal cannot be struck.

The latest remarks from Danisco came in its full year financial report, published this morning. It indicates that an outright sale will take place only if it proves to be "more value enhancing" than a spin-off. It has not given any firm time scale for the negotiations to be concluded, however. Meanwhile France's Tereos, which confirmed to last month that it was bidding to buy the business, announced on Friday that it is pulling out of the race. Tereos cited the reason as there being "too many uncertainties attached to the bid process". According to reports, the decision was based on a block by Danisco on Tereos teaming up with a group of sugar beet planters. This leaves just Nordzucker in the running - and Nordzucker executives have expressed willingness to pay between €700m and €1bn. As for Tereos, it has said it will investigate other acquisition opportunities. The sugar business of Spain's Ebro Puleva, which came on the market in May, looks a likely target. Danisco's sugar de-merger was first announced in August 2007, and the rationale is to allow shareholders to target their investments, and to let both companies focus on development opportunities in their respective spheres. Originally planned to take place two years down the line, the de-merger was brought forward to 2008 as the outlook for the post-reform European sugar market took on a rosier hue. Strong performance In its full year report 2007/8, Danisco posted EBIT of DKK 652m (€87.4m) for the sugar division, up from DKK 171 (€22.9m) last year. Earnings remained on a par, at DKK 1785. "We booked a goodwill write down of DKK 600 million (€80.5m) as a result of the ongoing de-merger or sales process," said the company. Sugar showed strong operating performance throughout the year, posting EBIT of DKK 652 million (€87.4m). Across the group as a whole, Danisco reported revenue of DKK 18,778m (€ 2518.2m) and EBIT of DKK 2,151m (€288.5m). The ingredients division recorded organic growth of 5 per cent and flat EBIT of DKK 1588m (€213m), despite the impact of higher costs and a hit of DKK 70m (€9.4m) due to the unfavourable dollar exchange rate. Cultures, Genencor and emulsifiers were said to have "solid momentum", while sweeteners faced some challenges as a result of declining demand for xylitol.

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