ABF may be interested in Ebro sugar buy

By Jess Halliday and Shane Starling

- Last updated on GMT

Related tags: Sugar, European union

Associated British Foods is not discounting rumours that it is interested in acquiring Ebro Puleva’s sugar division, saying it is a logical market conclusion that it would be in the frame.

Spanish player Ebro announced in May that it is looking to sell its sugar division or spin it off into a separate business – a strategy similar to that of Danisco which has now opted to go down the sale route. In July it confirmed that Nordzucker is intending to buy the business.

Following press reports of ABF’s interest in Ebro at the weekend, ABF’s head of external affairs Geoff Lancaster told FoodNavigator that it is “not unreasonable to conclude ABF would be interested”. ​Although no formal statement will be forthcoming in the next two weeks, he said one could be expected by the end of the year.

There has also been some speculation that Tereos could be interested in Ebro’s business. Tereos was initially interested in the Danisco business, but pulled out citing "too many uncertainties attached to the bid process".​ According to reports, the decision was based on a block by Danisco on Tereos teaming up with a group of sugar beet planters.

However a source close to Tereos confirmed to FoodNavigator.com today that Tereos has no plans in Spain.

Ebro’s plans

In announcing its spin or sale plans, Ebro said​selling its sugar sector would reduce group revenues from €2.69bn to €2.03bn, based on 2007 financial results.

EBITDA would fall from €306m to €226m, said Ebro, but company debt would be "greatly reduced"​, though the exact amount is as yet unknown.

"The group's business structure would also change significantly, as the brand-based and international businesses would acquire a greater weight in the group,"​ said the company.

Earlier this year, Ebro said its strategic plan aimed to focus efforts and resources on its core businesses, optimise overheads, divest in non-strategic businesses and properties not tied to the group's activities and reduce debt.

Ebro is looking to complete the spin off or sale by May 2010, and is understood to have appointed Bank Santandar to act as its advisor.

Sugar reform

The European sugar reform was introduced in 2006 with the aim to improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future.

Under the programme, financial incentives are offered to the less competitive producers to leave the market. The goal is to reduce the volume of sugar on the market by six million tonnes by 2010.

For sugar producers, this has led to considerable consolidation in the market; some, such as Tate & Lyle, have kept a hand in but have move to put more emphasis on other parts of their business, such as value-added ingredients.

In October last year, Ebro said it thought companies' withdrawal from production throughout the European Union would "lead to a market situation in the period 2009-2014 of a smaller sugar supply and, consequently, greater price stability"​.

It said the reforms meant Spain's sugar quota would be cut by 50 per cent, with Ebro receiving an annual production quota of around 400,000 tonnes of national sugar.

Three of its sugar factories would also face closure it said, and the EBITDA of its sugar division would drop to €70m for the period 2009-2014, compared to €120m in 2005.

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