Wilmar Gains India, Brazil Sugar Assets in Shree Renuka Deal

Feb 21, 2014 5:20 am ET

(Updates with closing share prices in fifth paragraph.)

Feb. 21 (Bloomberg) -- Wilmar International Ltd., the largest sugar cane miller in Australia, will gain joint control of India’s Shree Renuka Sugars Ltd. in a deal valued at about $200 million.

Wilmar will buy 5.2 billion rupees ($84 million) of new shares in India’s largest refiner at 20.08 rupees apiece, it said yesterday in a statement. Wilmar and Shree Renuka’s controlling holders will then offer to buy as much as another 26 percent of the expanded share capital for 21.89 rupees each.

The investment will allow Wilmar to expand its sugar unit to India, the world’s second-largest producer, and Brazil, the largest exporter of the sweetener. The Singapore-based company entered the sugar business in 2010 when it bought Australia’s Sucrogen Ltd. and added assets in New Zealand, Indonesia, and Morocco.

“If they want to consolidate and grow the business, they need to not just be dependent on Australian sugar,” Carey Wong, a Singapore-based analyst at OCBC Investment Research Pte., said by phone. Wilmar is trying to diversify its sources of supply, he said.

Wilmar, also the world’s largest palm-oil processor, rose 0.3 percent to S$3.37 at the close of trade in Singapore. Shree Renuka slumped 6 percent to 21.05 rupees in Mumbai.

Gaining Access

Investing in Shree Renuka will give Wilmar access to 1.7 million metric tons of refining capacity and 7.1 million tons of milling capacity in India. It will also have interest in 13.6 million tons of milling capacity in Brazil, joining other players such as Bunge Ltd. and Noble Group Ltd.

“Both markets have interacting trade flows which influence the global sugar market,” Wilmar said in the statement. “It is important for Wilmar to establish a significant presence in both these markets.”

As part of the deal, Wilmar and Shree Renuka’s controlling shareholders will invest as much as 7.3 billion rupees through a rights offer. The funds will be used to reduce Shree Renuka’s debt, according to the statement from Wilmar.

After the transactions, Wilmar will jointly control the company with Shree Renuka’s founders, it said.

Shree Renuka, based in Mumbai, had total debt of 84.8 billion rupees as of March, according to data compiled by Bloomberg. That’s up from 8.4 billion rupees in 2008.

“India is a very important market for Wilmar,” Chief Executive Officer Kuok Khoon Hong said in the statement. “This venture will complement the development of our edible oils and other businesses in India.”

--With assistance from Chanyaporn Chanjaroen and Winnie Zhu in Singapore, George Smith Alexander in Mumbai and Sam Nagarajan in New Delhi. Editors: Iain Wilson, Andrew Hobbs