Illovo set to delist if investors swallow ABF’s sweetened offer

AFRICA’S biggest sugar producer, Illovo, plans to delist from the JSE after Associated British Foods sweetened its offer to minority shareholders to buy out the remainder of the company.

ABF, which bought a 51% stake in Illovo in 2006, announced on Friday that it had agreed to offer R5.6-billion, to be settled in cash, for a full shareholding.

Illovo CEO Gavin Dalgleish said: “We are looking to conclude this deal through a scheme of arrangement with minority shareholders . . . that vote is likely to be in the back end or middle of May.

“If that is successful, we will look at a delisting at the beginning of July.”

The agreed offer price is R25 a share, up from an offer in February of R20 from the Londonbased diversified food and retail group.

Andrew Lapping, chief investment officer at Allan Gray, whose clients own 18% of Illovo, said: “In terms of our clients, we think R25 is a good price.”

Dalgleish said the revised offer was made after “we retained Rand Merchant Bank to determine the fair and reasonable assessment of the offer and the conditions that apply to that”. Based on that assessment, it was recommended to the minority shareholders that the offer price at R25 a share was fair and reasonable.

Illovo’s share price rose 18% after the deal was announced, to its highest since August 1994.

It has been a difficult period for the sugar producer, whose performance has been hurt by the drought in sub-Saharan Africa. Sugar production fell by 10% and operating profit decreased by 37% to R881-million for the six months to end-September last year.

Dalgleish said post-merger plans would include efficiency improvements so the company could remain competitive in a difficult environment. “Don’t think of it as cost-cutting necessarily; you are always driving efficiency improvements into the business.”

ABF chief financial officer John Bason said the group would not be selling assets because of the deal.

“There is no need for a largescale sale of assets here; that is not even remotely on the agenda. It’s a tough environment out there. We’ve got the wherewithal to allow Illovo to thrive; we don’t need to sell things off to continue.”

Illovo has been part of South African industry for a century. Dalgleish said: “We are proud of our South African heritage. We are equally proud that we have been able to extend into Africa to the extent that we have. So that is the route of our business and we will remain supported by ABF.”