UK Sugar maker ABF buys Spanish sugar unit for $519 million
16 December 2008
Associated British Foods Plc (ABF), the owner of British Sugar, has agreed to buy Ebro Puleva SA's sugar unit Azucarera for €385 million ($519 million), gaining half the market in the Iberian Peninsula as European Union reforms reduce production.
Azucarera Ebro is the leading sugar producer in Iberia supplying some 50 per cent of the 1.6 million tonnes of sugar consumed. Historically the business processed sugar from eight beet factories and had a beet quota of 741,000 tonnes. Following its agreement to permanently renounce 363,000 tonnes of quota from October 2009 it will process at three factories in northern Spain and a factory at Guadalete in southern Spain.
British Sugar is the second largest sugar producer in the world with production last year of some 3.9 million tonnes. It has extensive operations in the UK, Poland, China and southern Africa.
Azucarera Ebro will strengthen the existing EU operations of British Sugar. It has four well-invested beet sugar factories, a state-of-the-art packaging centre and a new refinery is being built. The productivity of the beet growers is amongst the best in Europe.
The acquisition should boost profit in fiscal 2010, according to a statement today from London-based ABF, whose other businesses include Twinings teas and the Primark clothing chain. A tentative agreement on the acquisition was struck on 20 November. The deal will be funded from the international food, ingredients and retail group's existing cash resources with a deferred component of €20 million to be paid over the next two years.
ABF, whose sugar business is the world's second largest, is making the purchase three years after EU governments agreed to cut minimum prices and compensate farmers to encourage less efficient processors to close. Ebro's sugar unit, which ABF said had some of Europe's most efficient beet growers, will ''permanently renounce'' almost half its historic quota from next October and produce at four fewer plants.
