The Australian | 4 June 2011
by Andrew Fraser
TWO of the biggest and most established sugar mills in north Queensland are set to pass into foreign ownership.
Proserpine was sold yesterday to a Singapore company and Tully looks as though it will be sold to Chinese interests.
Both mills have been owned by growers since they were established and the ownership change represents one of the biggest shake-ups in the sugar industry since it was deregulated in 2006.
Sugar mills are highly capital-intensive, and grower-owned mills have been stretched financially in the past year as cyclones have battered north Queensland and the sugar crop.
In these circumstances, large international companies have the capacity to gain synergies by combining sugar mills in a way that smaller individual mills cannot.
The Chinese government-owned China Oil & Food company increased its takeover bid for Tully Sugar yesterday to $44 a share, valuing the mill at $136 million, and the Tully Sugar board recommended it be accepted.
But the recommendation was made "in the absence of a superior proposal", leaving the way open for either US agribusiness Bunge or French-backed Mackay Sugar to increase their offers.
But the endorsement is still significant, as previously the board has recommended to its shareholders that no action be taken.
Before last night's increase by Cofco, each of the three bidders for Tully Sugar were offering $43 a share, well up from the $41 a share each of them were offering when Tully Sugar shareholders voted two weeks ago to change the constitution to allow the company to be taken over.
Further south at Proserpine, the mill was sold for $115m to Australia's largest sugar mill operator, Sucrogen, the wholly owned Australia subsidiary of Singapore's Wilmar, which bought the sugar mills previously run by CSR.
Proserpine was being targeted by Mackay Sugar as part of a syndicate of smaller mills it is trying to put together to take over Tully, but at present, Mackay's only partner is Mossman Mill near Port Douglas, one of the smaller mills.
Mackay Sugar chairman Andrew Cappello said his company had been very keen to have Proserpine involved as part of an effort to keep sugar mills in Australian hands, but the sentiment was not returned.
"We knew they were talking to someone, but we never knew who, although you could always guess it was Sucrogen," he said. "It's up to the growers to decide, but it'll be a big shock for them, going from being a co-op to being run by a huge international company."
Sucrogen produces about half Australia's raw sugar supply and owns four mills in the Burdekin region near Ayr, two in the Herbert region near Ingham, and Plane Mill south of Mackay.
Proserpine is the fifth largest sugar mill in north Queensland and crushes about 1.7 million tonnes of cane a year, but it has the capacity to crush 2 million tonnes.
Sucrogen chief executive Ian Glasson said the company planned to buy back former cane land now used for timber plantations and put it back under cane. .
"We've had a lot of land lost to those timber schemes but at the moment we want to get as much cane into the ground as we can," he said. "We're close to Asia. . . this industry has a great future."