Csr M&a

Wilmar Acquisition of Sucrogen (CSR Sugar)

Background: On 5th July, 2010 Wilmar and CSR announced they had agreed terms for the sale by CSR of Sucrogen, its sugar and renewable energy subsidiary. The sale price was $1.75 bn, on an Enterprise Value basis. The prospective sale of Sucrogen had been well known in the market for some time with Bright Foods, a Chinese government owned company, having made a conditional offer of A$1.75 bn on 1st April 2010. However, Wilmar’s role as a potential purchaser was a surprise to analysts. Wilmar communicated this transaction as a foundation for further advancement of its sugar industry interests. This transaction was completed on 22nd December, 2010, following the receipt of ZFIRB and other approvals.

On 15th December, 2010 CSR, in anticipation of the completion of the transaction, announced a series of capital management initiatives, including a return of capital and a special dividend. Details of these initiatives were announced on 7th January, 2011 and 3rd March, 2011

Parties: Wilmar International Ltd ("Wilmar"), Sucrogen Australia Pty Ltd ("Sucrogen"), CSR Pty Ltd ("CSR")

1. Estimate the potential value created by this merger for Wilmar and CSR

Q1(a)

i) Using the information provided by Wilmar assess how Wilmar expects to create value from this acquisition. How realistic or convincing do you think this value creation potential might be?

Investment rationale

Wilmar is Asia’s leading agribusiness group and the largest global processor and merchandiser of palm and lauric oils. These current operations in palm and lauric oils have grown to a significant scale demonstrating Wilmar’s ability to grow organically and though acquisitions resulting in a consistent increase in net profit from US$58m in 2005 to US$1.8bn in 2009. However, as these operations mature, sustaining these historical growth levels would become increasingly difficult. In addition, Wilmar had recently experienced declines in their net...