19th May 2006 07:01
Associated British Foods PLC19 May 2006 Associated British Foods plc announces a recommended offer to acquire 51% of Illovo, Africa's largest sugar producer For immediate release 19 May 2006 Associated British Foods plc ("ABF"), the international food, ingredients andretail group, has today announced a recommended offer to acquire 51% of thefully diluted ordinary share capital of Illovo Sugar Limited ("Illovo") for acash consideration of £317m (R3.8bn) to be paid from existing resources andbanking facilities on completion ("the recommended offer"). This offer issubject to regulatory approvals, Illovo shareholder approval and Court sanctionof the scheme of arrangement. Illovo is listed on the JSE Limited ("JSE"). In the year ended 31 March 2006its revenue was £458m (R5.5bn), it generated a profit before taxation andmaterial items of £54m (R651m) and headline earnings of £29m (R352m). At 31March 2006 it had gross assets of £333m (R4.0bn). The company is the largest cane sugar producer in Africa and one of the world'slowest cost producers. It is the leading producer in South Africa, Malawi,Zambia and Swaziland and has a strong and growing presence in Tanzania andMozambique. It produced 1.9 million tonnes of sugar in 2005/6 and hasidentified development programmes to expand this capacity substantially. British Sugar is a substantial and core business within ABF. It has sugaroperations in the UK, Poland and China, processing around 2 million tonnes ofsugar annually, and is the lowest cost beet sugar processor in the EU. ABF will support Illovo's stated plans for capacity expansion and development inits African markets. It is expected that Illovo will benefit from theapplication of British Sugar's proven expertise in improvement in operationalefficiencies, co-product development, marketing and product innovation. Inturn, British Sugar's Chinese cane sugar operations will benefit from Illovo'sagricultural expertise. The changes to the EU sugar regime will provide free access for exports to theEU from Least Developed Countries ("LDCs") from 2009. The LDC classificationincludes Malawi, Zambia, Tanzania and Mozambique. British Sugar will provide anefficient route to market for these exports from Illovo. In the first full year after acquisition the operating profit return is expectedto meet the ABF cost of capital, and will be earnings enhancing. George Weston, Chief Executive of ABF, said, "The combination of British Sugar and Illovo will create a powerful partnershipin Africa and Europe. Illovo has strong positions in its African markets, anexcellent management team and the opportunity to benefit from free access forexports from its LDC operations to the EU from 2009. There is considerablescope to develop Illovo through British Sugar's market and technical expertise." Don MacLeod, Managing Director of Illovo, said, "Illovo and British Sugar are long term players in the sugar industry withsignificant complementary strengths, and are recognised for their efficiency assugar producers. Illovo will benefit from British Sugar's knowledge of theEuropean market particularly once its operations in LDC countries receiveunrestricted access into the EU from 2009. It is anticipated that there is goodscope for technology transfer between the two parties." Deal Structure The recommended offer carries the unanimous recommendation of the Illovo Boardand the full support of the Illovo management team. ABF has receivedconditional undertakings to support this offer from the principal shareholders,either directly or through recommendations to their clients, accounting for 64%of Illovo's ordinary shares in aggregate. The directors of Illovo have saidthat they intend to vote their own shares in favour of the offer. Theconditions of the recommended offer include obtaining regulatory approvals,Illovo shareholder approval and Court sanction of the scheme of arrangement. The principal features are: • Offer for 51% of the fully diluted ordinary share capital; • Illovo shareholders will receive a consideration of R21 per share in cash; • Illovo will remain listed on the JSE and will retain its South African identity; • The acquisition of shares is to be effected by way of a scheme of arrangement governed under South African law; • ABF will have appropriate Illovo Board representation; • Existing management team will continue and Don MacLeod will be asked to join the Executive Committee of British Sugar; and • The transaction is expected to be earnings enhancing for ABF from the outset. For further information please contact: Associated British Foods: Until 1200 only George Weston, Chief Executive Geoff Lancaster, Head of External AffairsJohn Bason, Finance Director Mobile: 07860 562 659Tel: 020 7638 9571 Jonathan Clare/Chris Barrie/Sara Batchelor, Citigate Dewe RogersonTel: 020 7638 9571 After 1500 John Bason, Finance DirectorTel: 020 7399 6500 A presentation for analysts will take place at 0900 hrs (London time) at theoffices of ABN Amro, 250 Bishopsgate, London EC2M 4AA. A webcast of the conference call will be available on the company website,www.abf.co.uk. The presentation will also be audible on +44 20 7162 0025 with atelephone replay facility available for 7 days following the event on +44 207031 4064, PIN number 706171. Notes to Editors: Associated British Foods plc Associated British Foods plc ("ABF") is a diversified international food,ingredients and retail group with global sales of £5.6bn and over 42,000employees. It is listed on the London Stock Exchange with a marketcapitalisation of £6bn. It operates in 41 countries with significant businessesoutside Europe in Australia, China and the US. It has had a successful historyof international partnerships with minority shareholders. The group operates infour business categories: Primary Food & Agriculture, Grocery, Ingredients andRetail. ABF aims to achieve sustainable leadership positions in markets and businessesthat offer potential for profitable growth. It strives to achieve this througha combination of organic growth and, while maintaining a strict financialdiscipline, the acquisition of complementary businesses. The group has a strongtrack record of successfully completing value adding acquisitions such as ABMauri, its leading international yeast and bakery ingredients business, Mazola,Ovaltine and Littlewoods stores. British Sugar British Sugar is a wholly owned, substantial and core business within ABF. Ithas sugar operations in the UK, Poland and China which process around 2 milliontonnes of sugar annually. British Sugar is the lowest cost beet sugar processor in the EU and processed1.34 million tonnes of sugar during the last UK campaign. It has marketleadership in the UK and established sales positions elsewhere in the EU and itstwo leading retail brands in the UK are Silver Spoon and Billington's. It has aproven ability to create value through improvement in agricultural yields,operational efficiencies, co-product development, marketing and productinnovation. It has world class production facilities and technical expertise,and Wissington in Norfolk is the largest and most efficient beet sugar factoryin the world. The UK's first bioethanol plant is currently being constructed atWissington. British Sugar entered into its first joint venture in the Polish market in 1989.It has since developed its presence considerably. 200,000 tonnes of sugar areprocessed annually and its two facilities include Glinojeck, Poland's highestcapacity and lowest cost beet factory. It has used its expertise to buildPoland's premier retail sugar brand, become a leader in animal feedsco-products, improve agricultural yields and reduce processing cost throughinvestment and process innovation. British Sugar entered the Chinese market in 1995 through a joint venture and nowhas four cane sugar factories with a processing capacity of 550,000 tonnes ofsugar annually. It has dramatically improved agricultural productivity, factoryextraction and sugar yields and has developed a direct industrial customer basewith its supply of European standard sugar. Illovo Sugar Limited Illovo is a leading, global, low cost sugar producer and a manufacturer of highvalue downstream products. It is Africa's biggest sugar producer and hasextensive agricultural and manufacturing operations in six African countries. Excellent climatic and soil conditions found in the group's African countries ofoperation, accompanied by irrigation from secure water sources, are ideal forthe cultivation of high quality sugar cane. Annual cane production of 5.5million tonnes is produced on agricultural estates in South Africa, Malawi,Zambia, Swaziland, Tanzania and Mozambique. Sugar production in 2005/6 was 1.9million tonnes comprising 920,000 tonnes in South Africa, 275,000 tonnes inMalawi, 250,000 tonnes in Zambia, 235,000 tonnes in Swaziland, 140,000 tonnes inTanzania and 75,000 tonnes in Mozambique. Illovo is a major supplier of sugar to African consumer and industrial markets.It is the leading producer in South Africa, Malawi, Zambia and Swaziland and hasa strong and growing presence in Tanzania and Mozambique. It has ACP access tothe EU, principally through Swaziland, while the African operations outsideSouth Africa also have access to the South African Customs Union market underthe terms of the Southern African Development Community (SADC) Sugar Protocol onTrade. Sugar in consumer packs is supplied into other regional markets withinAfrica. The South African, Swaziland and Mozambique businesses export sugarinto the world market. In recognition of its interdependence with the communities in which it operates,Illovo co-ordinates a wide range of social investment-related programmesfocusing on basic needs such as the provision of water and sanitation, access tohealth care, education delivery and involvement in community outreachprogrammes. Illovo also provides considerable extension, training and othersupport to Black farmers in order to promote sustainable agriculture andeconomic development activities. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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