MACKAY Sugar has entered into a binding agreement to acquire milling and related assets of Mossman Central Mill for $25.3 million.
Mackay Sugar chairman Andrew Cappello said the acquisition would complement Mackay Sugar’s operations, contribute to the growth of its core business, and is expected to result in additional shareholder value.
“This is a positive step for Mackay Sugar; it presents further cane expansion opportunities and will increase our sugar production.
“Under Mackay Sugar ownership there will be confidence in the long-term future of the Mossman Central Mill.
“We will incentivise cane production and expect a 25 per cent increase in cane supply in the first four years.
“The combination of the increased cane volumes and the cost savings in managing the Mossman mill, as part of Mackay Sugar’s operations, are expected to generate greater financial returns for our shareholders,” Mr Cappello said.
Under this transaction, the milling and related assets will be acquired by Mackay Sugar through the issue of approximately $12 million in Mackay Sugar shares and refinancing $13 million in debt. The shares, which amount to approximately 3.3 per cent of the issued capital of Mackay Sugar, will be held by Mossman Central Mill.
The export sugar produced by Mossman Central Mill will continue to be marketed through Queensland Sugar Limited. However, Mossman Central Mill will retain its food grade bagged sugar operation, which it markets under the brand ‘Daintree Gold’. Daintree Gold will be supplied raw sugar by Mackay Sugar under a commercial agreement.
The transaction is subject to a number of conditions precedent and is expected to be completed on 1 June 2012.
Mr Cappello said Mackay Sugar would continue the Cane Supply Agreement that is in place with the Mossman growers for the next three years, and would also offer the forward pricing option and cane development incentives, such as Secure the Future and Plant Loan Scheme, currently available to Mackay growers.
“Similarly, we will be taking on the employment obligations for those engaged in the cane transport and milling operations at Mossman.
“With the acquisition happening close to the start of the 2012 Season, we will use the six month crushing period to plan the integration of personnel and operating systems as appropriate.
“I am confident that Mackay Sugar can offer the platform necessary to expand Mossman’s cane supply and, consequentially, increase our raw sugar production to take advantage of the demand for sugar in the Asian region,” Mr Cappello said.