Louis Dreyfus, the French-based commodities giant, revealed plans
to beef up in sugar refining and distribution as it unveiled the purchase of Imperial
Sugar, the struggling US sugar group.
Louis Dreyfus has received unanimous backing from the Imperial
Sugar board for a cash offer at $6.35 a share, a 57% premium to the price of
the Texas-based company's shares at Monday's close.
Imperial Sugar shares rocketed 56% to $6.33 in early deals in New York, close to the bid level.
The deal represents a divergence from a strategy of building
up in sugar production, notably in Australia and Brazil, which the trading
house, and rivals such as Bunge and Wilmar International, have followed in
However Imperial Sugar represents an "excellent strategic
fit" for a drive to find outlets for sugar, Louis Dreyfus said.
"This transaction is an important step forward in our plan
to grow and diversify our global sugar activities from sugar cane crushing and
international sugar trading into sugar refining and distribution in major
consumer markets," Mikael Morn, the Louis Dreyfus Commodities chief executive,
Imperial Sugar's asset to a takeover follows a longstanding
battle to stabilise its finances, after chalking up losses in three of the last
The company in December sold for $18m its one-third share in
a Louisiana refinery to partners Cargill and Sugar Growers and Refiners, and
last month completed the sale of Wholesome Sweeteners to Continental Grains-owned Arlon Group, with a
$38m gain, in its effort to raise cash.
Imperial Sugar's decline reflects largely the fall-out from
a fatal explosion four years ago at its Port Wentworth refinery which, while
now rebuilt, has struggled with teething problems.
However, it has also suffered from the high prices, until
recently, of raw sugar, which it has been unable to pass on in full to customers,
so squeezing margins and leaving it struggling to repay debts.
Of the $203m valuation placed on Imperial Sugar by Tuesday's
deal, only some $80m represents equity, with the balance in borrowings and
other liabilities, such as pension payments.
Louis Dreyfus, which termed Imperial a "well-established
operator", has built up substantial sugar production assets in a drive to move
beyond traditional trading activities, in a range of agricultural commodities, in
which strong competition has cut margins.
The group in 2009 became the world's second-ranked cane
processor and renewable energy group with the $460m purchase of Santelisa Vale,
one of Brazil's largest sugar and ethanol producers.
Louis Dreyfus two years considered floating its Brazilian sugar
operations amid a range of options for reforming its financial structure, and
easing access to capital markets, a drive which two year ago led it to consider
a merger with Singapore-based Olam International.