UPDATE 4-French sugar coop eyes EU reform with 1 bln deal

Tue Oct 4, 2011 8:57am EDT

* Cristal Union agrees purchase of 51 pct of Vermandoise

* Minority buyout to follow purchase of family majority

* Deal also includes Vermandoise unit SSPLV

* Cristal says preparing for post-2015 EU sugar liberalisation

* New group to have 1.2 bln euro sales, No. 2 in French market (Rewrites first paragraph, adds quotes from news conference)

By Dominique Vidalon

PARIS, Oct 4 (Reuters) - Sugar cooperative Cristal Union is to acquire French peer Societe Vermandoise in a deal worth nearly 1 billion euros ($1.3 billion), as it gears up for an expected liberalisation of the European sugar market.

The takeover, which would create the No. 2 two sugar group in France after Tereos and the No. 5 in the European Union, would help Cristal Union compete in European and world markets once the EU dismantles its sugar quota system later this year, company officials said on Tuesday.

"In a more liberalised system the consolidation of the two groups will give us greater access to international markets, Cristal Managing Director Alain Commissaire told reporters.

The EU's executive is due this month to publish proposals for a reform of its sugar regime, which regulates production through quotas and minimum prices and which expires in 2015.

A liberalisation of the EU regime could also open up exports and imports, which are tied to quotas and are the subject of international trade negotiations.

Cristal Union's acquisition of Vermandoise -- the second major shakeup in the European sugar sector after Tate & Lyle Plc's disposal of its European sugar operations to American Sugar Refining last year -- would build a group with pro-forma sales of close to 1.2 billion euros and annual sugar production of around 1.45 million tonnes.

The cooperative has signed an exclusive deal to buy a 51 percent stake owned by the Delloye family in Vermandoise, which has a market capitalisation of 262 million euros.

This will also cover Vermandoise's majority holding in another sugar company, Societe Sucriere de Pithiviers Le Viel (SSPLV) , whose market value is 472 million euros, according to Reuters data.

The overall valuation of the transaction, estimated at 951 million euros, represents the cost of buying all shares in Vermandoise and SSPLV, Commissaire said.

After acquiring the majority shareholding of the Delloye family and if approved by competition authorities, Cristal Union is to launch a buyout offer for the rest of Vermandoise shares at 3,487.30 euros per share and for the rest of SSPLV shares at 1,692.76 euros per share.

Following the closure of the buyout offer, expected in late December or January, Vermandoise will be delisted.

FULLY FUNDED

The valuation reflected recent deals in the European sugar sector and strong growth prospects, officials said.

The main shareholder apart from the Delloye family affected by the transaction is U.S. investment fund First Eagle, with a 20 percent stake in SSPLV, they said.

The share offer prices would represent a premium of 98.7 percent to SVS's closing price on Sept. 30 and a premium of 125.7 percent over SSPLV's closing price on Sept 30.

The deal is fully funded by Credit Agricole Nord Est and Credit Agricole Corporate and Investment Bank, part of Credit Agricole SA .

"The financing was done without any difficulty," Commissaire said, citing Cristal Union's secure financial position and support for the project from Credit Agricole as the traditional lender to France's farm sector.

Cristal Union posted gross operating profit of 144 million euros in 2010-11, compared with 81 million for Vermandoise, officials said, declining to give further details about Cristal Union's results.

Cristal Union, known for the "Daddy" and "Erstein" sugar brands, is a cooperative grouping 5,350 farmers that produces 900,00 tonnes of sugar and 4.5 million hectolitres of alcohol per year from 11 sites and employs 1,500 people in France.

Groupe Vermandoise produces 550,000 tonnes of sugar and 600,000 hectolitres of alcohol each year from four sites. It employs 568 people and is supplied by 3,800 sugar beet growers who will have the option of becoming cooperative shareholders in Cristal Union following the takeover.

The combined group would maintain existing production sites and jobs, officials said.

While awaiting the reform of the EU's sugar market, Cristal Union was already expanding its overseas presence, including through a sugar refinery in Algeria due to launch in mid-2012.

Main French rival Tereos, also a cooperative, has developed a large business in Brazil and these activities form part of its listed subsidiary Tereos Internacional .

Already a producer of ethanol fuel, Cristal is in talks with two U.S. molecule research companies to produce a new form of jet fuel, with announcements expected in the year ahead, Commissaire said.

He said Cristal is also preparing to distribute in France sweetener products derived from the stevia plant in a supply deal with global agribusiness group Cargill . France approved the launch of the sweetener last year ahead of pending EU-wide authorisation. ($1=0.753 Euros) (Editing by Mike Nesbit and David Holmes)

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