Wilmar Sugar plans in Papaua New Guinea

Wilmar International Ltd said it plans to develop sugar plantation and sugar mill in Papua with an estimated investment cost of around US$2 billion, a company official said at the weekend.

M.P. Tumanggor, commissioner of PT Wilmar Nabati, a subdiaary of Wilmar International, was quoted by kontan.co.id on Saturday, said the company will conduct a feasibility study for investing in sugar plantation in Papua within the next six months.

"We don’t know for certain yet when the plan could be realized as the infrastructure in Papua is not sufficient," he said, noting the high transportation and distribution costs would make sugar price to be expensive and less competitive.

Tumanggor said Wilmar's management had been in talks with M.S. Hidayat, Industry Minister, as the company is proposing to get incentives for building roads and ports.

The cost to develop infrastructure alone in Papua could reach Rp2 trillion, he said.

Wilmar International operates in four business segments: merchandising and processing, consumer products, plantation and palm oil mills, and others.

The other segment includes the business of manufacturing and distribution of fertiliser products and ship-catering services.

The company sells 40 percent of its crude palm oil to its customers in Europe, China and India.

Wilmar: Coup d' Grace

Yes, play on a level playing field such as that of the world Cup in South Africa where even giants like Brazil and Argentina can fall by the wayside.

Robert Kuok sold off his Malaysian sugar interest entirely. He did not want the nefarious 'Arab and Camel' strategy model to be used to boot him out unceremoniously out of his sugar monopoly. He knows about non-transparent rules, political pressure from the top and  changing of goal-posts.

When the Malaysian authorities created a  sugar duopoly, cutting off his sugar monopoly, Robert knew his days were numbered. So, he sold out the Malaysian sugar business, lock, stock and barrel. Great move, Bob Kuok!

Now he has brought into the Australian sugar business. Superb move.

Let us read the report from Reuters.

" SINGAPORE, July 5,2010 — Singapore’s Wilmar International Ltd on Monday struck a surprise deal to buy Australian conglomerate CSR Ltd’s sugar business for A$1.75 billion (RM4.75 billion), trumping China’s Bright Food Group.

Shares in CSR, the world’s fifth-largest sugar-refiner, climbed more than 4 per cent after CSR announced it had agreed to sell the sugar arm to Wilmar, the world’s largest listed palm oil producer.

Bright Food, which has been chasing CSR since January, was not expected to come back with a higher offer, according to two sources close to the transaction. CSR had also held talks with several other interested bidders, they said.

“The deal is done, there is no real opportunity for them (Bright Food) to come back to raise their offer,” one of the sources said.

Wilmar’s purchase price was A$1.347 billion for equity and A$403 million for debt, 6 per cent higher than a conditional A$1.65 billion offer Bright Food made to CSR’s board late last week.

The deal was a coup for conglomerate CSR which has spent more than a year working on plans to either spin-off the sugar business into a separately listed company, or sell the asset.

Until the Wilmar bid, the market was unaware of any other bidders looking at the asset.

WILMAR’S SUGAR PUSH

Wilmar said the deal was part of plans to expand its sugar business.

“This is positive news as it’ll help jump start their strategy to expand in the sugar business and (represents) the next growth driver for Wilmar,” said DBS Vickers analyst Ben Santoso.

He added that acquiring CSR’s sugar business would also give Wilmar expertise in cane-related research and development.

Santoso expected the new business to see synergies from capitalising on Wilmar’s extensive distribution to China and Asia.

In Singapore, Wilmar’s shares rose as much as 2.3 per cent.

CIMB analyst Ivy Ng said the deal was positive in the medium term because it gave Wilmar knowledge to expand to other parts of Asia.

“But in the short term, based on what they have so far it does not appear the acquisition will significantly increase their earnings,” said Ng.

“In the longer term, it would be good if they can replicate the business in other parts of Asia like China, India and Indonesia, but you won’t see that tomorrow.”

CSR said the deal was expected to be completed by the last quarter of 2010, and is conditional on approval by Australia’s Foreign Investment Review Board (FIRB).

In May, FIRB delayed its decision on the Bright Food bid for up to 90 days, which raised concerns the bid may be blocked.

CSR said net proceeds from the deal would be about A$1.6 billion, and it would consider a range of options for the funds. 

Great news for Wilmar and PPB shareholders after the Indonesian supposed fiasco.