Brits run eye over CSR's sugar spin-off

Associated British Foods, which owns a suite of food companies including British Sugar, is considered a frontrunner among international players to strike an investment in CSR Sugar, or bid for the entire operation outright.

As part of the demerger process to separate sugar from CSR's other operations, consisting of building materials and aluminium, the CSR board is seeking to attract an investor to take up a stake of about 25 per cent in the newly created CSR Sugar.

A trade sale is also possible. Besides Associated British Foods, the likely bidders are the Brazilian sugar cane producer Cosan, the private US group Cargill and the South Korean food and industrial conglomerate CJ Corporation.

The British company remains a favourite because of its relatively low gearing level of 23 per cent, which would allow it to buy a large parcel of shares or pay the estimated $1 billion for a full purchase of CSR Sugar.

ABF has a capitalisation of more than #6 billion and annual sales of #8.2 billion. The recent disposal of its Polish sugar business, BSO Poland, to Pfeifer & Langen Polska will give it a hefty capital injection just at the right time as the CSR board and its advisers push ahead with the demerger plan.

BSO Poland was established in 1989 when British Sugar acquired an interest in two state-owned sugar factories. The subsidiary has capacity to produce more than 150,000 tonnes of sugar a year and is the fourth largest sugar producer in Poland. BSO Poland's gross assets were #200 million as at August 31 last year.

International sugar assets have grown steadily in value this year as the sugar price approaches 30-year highs because of a shortage of the commodity caused by poor weather conditions.

Last week the miner Anglo American sold its 49.5 per cent stake in the Johannesburg-listed sugar and starch group Tongaat Hulett for #316 million.

CSR is Australia's largest sugar company with annual refining capacity of 970,000 tonnes and producing about 40 per cent of Australia's yearly production of raw sugar.