Danisco Sugar to be sold to Nordzucker
Nordzucker for DKK5600m, around €751m, bringing to an end months of
speculation as to whether it would agree to a sale or opt to spin
off sugar into a separate business.
Ever since Danisco first announced plans last August to somehow separate its sugar and ingredients businesses - in order to allow shareholders to target their investments and to let both companies focus on development opportunities in their respective spheres - developments have been hotly watched by the industry. It said it would go for the option that yield the best value for shareholders. Danisco's aim is to evolve into a "focused, bio-based, market-driven ingredients provider", and today's news is reckoned to take it a step closer to this. The revelation that Nordzucker is to buy the division comes as no surprise, as executives said that last month that the firm was willing to pay between €700m and €1bn. Although the price tag is at the lower end of this ball park, Danisco will also receive DKK600m (€80.45m) in cash proceeds from selling its EU sugar quotas for 2007/8, and before. France's Tereos was also in the running as a potential buyer until the end of June, but it pulled out, citing "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. Beet growers' interests In parallel with the deal, Danisco Sugar has entered into an agreement with Danish and Swedish associations of beet growers covering future beet supply. When the transaction closes, the growers will receive some DKK 150m (€20m) from Danisco, which is intended to give them the means to acquire an equity interest in the business early on. These pledges have been well received by the growers. Jorn Dalby, chairman of Danske Sukkerroedyrkere, said that the combination of grower-owned Nordzucker and the Danish and Swedish growers will give a "strong platform for the future development of Danisco Sugar". Svenska Betodlarna chair Otto von Arnold was positive about the implications for sugar beet growing in the Scandinavian region. "The conclusion of discussions regarding the future price of sugar beet and the investment contribution from Danisco create a strong basis for the future development of beet growing in Denmark and Sweden," he said. Business in good shape Hans-Gerd Birlenberg, CEO of Nordzucker, said: "With Danisco Sugar we are gaining a partner which is in excellent all-round shape and which will strengthen our operations substantially from day one." In its full year report 2007/8 released last month, 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). "Strategically, the two firms are excellently matched - and culturally we have also discovered that we have a great deal in common," Birlenberg added. "In short, Danisco Sugar is the best possible partner for Nordzucker." Expectations for closure The sale of the Danisco Sugar business is expected to close within the next six months. It is, however, dependent on merger clearance and Danisco shareholders giving the board of directors the go-ahead for closure at the annual general meeting on August 20. Danisco says it expects the board to initiate a share buyback programme after completion, of between DKK 750m (€100.5m) and DKK 1000m (€134m).