Associated British Foods unveiled an outline offer for full ownership of Illovo Sugar valuing the group, African biggest sugar producer, at some $575m - a decade after taking a 51.4% in the group.
London-listed ABF - whose assets range from British Sugar, which processes the UK beet crop, to cane processing operations in China – said that it had made a "non-binding" approach to Illovo over buying the 48.6% of the South Africa-based company that it does not already own.
ABF said it intended to make an offer of 20 rand per share, in cash, for the outstanding stock, a premium of some 9.5% to the stock's closing price on Friday.
However, Illovo shares closed up 9.7% at 20.15 rand in Johannesburg on Monday, indicating that investors believe that ABF will, to seal the deal, be forced to sweeten its proposal.
Illovo said its board would, separate from the three directors nominated by ABF, "appoint independent advisors to assist it in the process going forward".
ABF's offer comes at a tricky time for Illovo Sugar which has faced, besides pressure on sugar prices from strong world supplies, production volumes sapped by the southern African drought which has sent the region's maize prices to record highs.
Analysts expect the group to report a slump to 499m rand in earnings for the year to the end of March, from 824.6m rand a year before.
Furthermore, it faces a squeeze on its lucrative sugar exports to the Europe Union thanks to reforms which will see the bloc - which has offered preferential access to sugar imports from countries, such as Zambia, deemed "least developed"- lift production quotas.
"Post-reform, Europe will move to a net exporter and sugar prices are expected to drop to export parity," Illovo Sugar said in November, highlighting a strategy of focusing on growing African sales instead.
In fact, ABF's acquisition plans for Illovo Sugar are bookended by European sugar reforms.
The group in 2006 justified its acquisition of its initial stake in Illovo in part on a 2009 shake-up which introduced the current set-up.
"The changes to the EU sugar regime will provide free access for exports to the EU from least developed countries (LDCs) from 2009," ABF said.
"The LDC classification includes Malawi, Zambia, Tanzania and Mozambique," countries within Illovo's footprint.
"British Sugar will provide an efficient route to market for these exports from Illovo."
ABF added that "in turn, British Sugar's Chinese cane sugar operations will benefit from Illovo's agricultural expertise".
Illovo paid £317m, then 3.8bn rand, for its initial 51% stake.
By Mike Verdin