Bunge to buy Tate & Lyle sugar trading division

by Eric Schroeder
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WHITE PLAINS, N.Y. — Bunge Ltd., an agribusiness and food company, has reached agreement to acquire the international sugar trading and marketing division of London-based Tate & Lyle P.L.C. According to Bunge, the acquisition will help the company strengthen its position in the sugar value chain by expanding its international trading and marketing activities. In addition, the acquisition is expected to create a stronger network for sugar origination in Brazil, Thailand and other geographies.

Financial terms of the transaction were not disclosed.

"Bunge’s strategy is to expand into complementary value chains, and sugar is an essential one," said Archie Gwathmey, co-chief executive officer of Bunge Global Agribusiness. "In the past two years we have established a sugar marketing and trading operation and purchased a sugar cane mill in Brazil. Strengthening our global team is a natural next step. Tate & Lyle has been one of the world’s leading international sugar traders with a long tradition in the business and strong customer and supplier relationships."

The purchase of the Tate & Lyle sugar business comes a little less than 10 months after Bunge agreed to acquire its first production asset in the sugar and sugar-based ethanol industry — a sugar cane mill and ethanol production facility in the Brazilian state of Minas Gerais, from the Tenorio Group.

The mill became operational in 2006 and has the capacity to mill 1.6 million tonnes. Bunge has plans to eventually expand the capacity to 4 million tonnes per year.

For Tate & Lyle, the disposal of the international sugar trading and marketing division continues the company’s focus on exiting volatile commodity markets and refocusing on core sugar refining operations.

Last year, Tate & Lyle sold its Mexican and Canadian sugar businesses. Earlier, the company sold its Domino business in the United States to Refined Sugars of New York in 2001.

"Our international sugar trading operation is a good business," said Iain Ferguson, chief executive officer of Tate & Lyle. "However, the recent sale of our sugar businesses in the Americas and the restrictions on exports from our E.U. cane sugar refineries, which were implemented as part of the E.U. Sugar Regime reforms, have reduced the value of international sugar trading to Tate & Lyle."

Tate & Lyle said the gross assets attributable to the unit were £288 million as of March 31, while net operating assets were valued at £106 million.

As part of the first phase of the transaction, the operations and employees of the international sugar trading business will transfer to Bunge. Working capital is expected to remain with, and be collected and paid by, Tate & Lyle through March 31, 2009, at which point it will be assumed by Bunge upon final completion of the transaction.

The transaction does not include Tate & Lyle’s shareholding in its subsidiary in Israel, Tate & Lyle Gadot Manufacturing, and the minority interests in sugar facilities in Saudi Arabia, Egypt and Thailand.

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