By Sumeet Chatterjee
MUMBAI, Feb 20 (Reuters) - Singapore's Wilmar International
has agreed to invest up to $145 million for a stake in
India's Shree Renuka Sugars, giving it a foothold in
the world's biggest sugar- consuming market.
The transaction, which will be completed in two steps, will
see Wilmar - the world's top palm oil processor with business
interests in sugar, laurics and other commodities - and the
Indian company's founders owning equal stakes in Shree Renuka.
India is the world's second-biggest sugar producer after
Brazil, where Shree Renuka has a division. Analysts said the
Indian company will be able to explore new export markets after
the tie-up with Wilmar.
"India has been producing surplus sugar for the past four
years," said Mukesh Kuvadia, secretary of the Bombay Sugar
Merchant Association. "The deal will help Shree Renuka Sugar
access global markets more easily."
Wilmar said it was important for the company to establish
its presence in Brazil and India, in addition to the company's
existing operations in Australia, New Zealand, Indonesia and
India usually produces white sugar, but its ample supplies
have depressed local prices below the cost of production. The
government wants mills to produce raw sugar, which can be sold
in the world market easily compared with white sugar.
In the first part of the deal, Wilmar will buy 27.5 percent
of Shree Renuka for $83 million through a preferential allotment
It will be followed by a mandatory tender offer to buy up to
26 percent from Shree Renuka's public shareholders by Wilmar and
the founders of the Indian company that will raise up to $86
million if the offer is full subscribed.
The price for the tender offer has been set at 21.89 rupees
a share, compared with its Thursday close of 22.40 rupees.
In the final stage, both Wilmar and founders of Shree Renuka
will jointly invest $117 million in the Indian company through a
rights issue, the companies said in a statement after Asian
markets closed on Thursday.
The deal will see an inflow of $200 million in Shree Renuka,
which Shree Renuka will use to pare its debt, a result of its
acquisition of two Brazilian firms - Vale Do Ivai SA for $82
million in 2009 and Equipav SA for $329 million in 2010.
After the completion of the transaction, Wilmar's stake in
Shree Renuka will depend on the response to the tender offer.
Wilmar, which earlier on Thursday posted a 23 percent drop
in its net profit in the fourth quarter to $369 million, said it
would fund the acquisition of the Shree Renuka stake from
internal cash and bank borrowings.
($1 = 62.2275 Indian rupees)
(Additional reporting Mayank Bhardwaj and Rajendra Jadhav;
Editing by Erica Billingham)