Bunge to Pursue Australia Sugar Opportunities as Bid Blocked

Bunge Ltd. will continue to seek acquisition opportunities in the sugar industry in Australia, the third-largest exporter, after its A$126.7 million ($127 million) bid for Tully Sugar Ltd. was blocked.

The company is waiting for a rival offer from Mackay Sugar Ltd. for Tully before deciding its next move, Bunge Asia Chief Executive Officer Chris White said by phone today. Bunge, the world’s second-largest sugar trader, remains interested in Australian sugar even if it fails to win Tully, he said.

Bunge lodged a bid for closely-held Tully in Queensland, seeking to expand in sugar-exporting countries amid rising Asian demand. The takeover was blocked on Feb. 18 when Queensland Sugar Ltd. and Mackay Sugar opposed the removal of a 20 percent shareholding cap and said a rival proposal was being developed.

“The burden on them, since they blocked the constitutional change, is to come forward with a superior offer,” White said. “If they don’t, then we will reconsider where we stand and what we will do.”

Raw sugar for May delivery on ICE Futures U.S. in New York fell 1.6 percent to 28.41 cents a pound on Feb. 18 after reaching a 30-year high of 36.08 cents on Feb. 2. The market was closed yesterday for a holiday.

Queensland Sugar has about 13 percent of Tully and sells all its output. The Brisbane-based company markets more than 90 percent of the country’s exports through agreements with mills. Mackay holds 4 percent of Tully.
Asia Strength

“We hope to be involved with Australian sugar either as a miller or a marketer in the future and there may be ways to accomplish that over time,” White said. “We want to be strong in the key destinations within Asia and we want to be strong in key origins that serve Asia, and that would include Australia.”

Bunge’s offer follows Wilmar International Ltd.’s purchase last year of CSR Ltd.’s sugar unit, Australia’s No. 1 producer. Mitr Phol Sugar Corp., based in Bangkok, has also expanded in the country by taking a stake of about 19 percent in Queensland- based Maryborough Sugar Factory Ltd.

“We expect Asian incomes to continue to rise,” White said. “We see the day when both China and India will become structural importers of sugar and that is one more ratchet up in the overall demand equation.

Queensland Sugar said last week that Bunge had indicated it wanted to become actively involved in the marketing process and to direct where the product should be shipped, while closely- held Mackay had requested 60 days to develop an alternative proposal.
Mackay Sugar

Mackay was looking at combining with Tully and other grower-owned operations such as the Mossman mill to capture benefits before international companies bought up the assets, Andrew Cappello, chairman of Mackay, said by phone.

“Our view was Bunge would probably take Tully out and then come hunting for the rest of us and they would then put the companies together and form a bigger conglomerate,” he said.

The rival arrangement would help shore up the marketing arrangements through Queensland Sugar, which pools volumes to meet demand from customers and finances advance payments to suppliers, he said.

“If you start taking big chunks of their volume away it becomes not viable for them to operate,” Cappello said.

source: bloomberg