Mauritius sugar merger details send stocks down

* Stocks in merger companies fall heavily

* EU sugar reforms spurring overhaul of sector

ANTANANARIVO, Madagascar Oct 22 (Reuters) - Shares in two of Mauritius' leading sugar producers tumbled on Thursday following the release of terms for a proposed merger at a time cuts in the EU guaranteed price make the sugar market tougher.

The deal would see shareholders in The Mount Sugar Estates Company Limited MOUN.MZ (TMSE) receive just over four shares in Harel Freres Limited HARF.MZ (HFL) for every cancelled TMSE share.

TMSE's stock closed down 18.7 percent at 100 rupees ($3.32) per share. HFL's share price fell 8.91 percent to 23.50 rupees.

"If the proposed amalgamation is approved by the shareholders of TMSE and HFL, the shares of TMSE will be cancelled and shareholders of TMSE will in return receive 4.137 shares of HFL for every one share of TMSE," the companies said in cautionary announcements released on Thursday.

TMSE's stock had opened trading at above the offer price, worth 123 rupees a share versus HFL's share price of 25.80 rupees.

Neither company was immediately available to comment.

The target date for the merger would be Jan. 01, 2010, following which HFL would continue as the amalgamated company.

Mauritius' sugar sector, a centuries-old pillar of the palm-fringed island's economy, is restructuring as the EU cuts its guaranteed price offered to exporters from the African, Caribbean and Pacific (ACP) bloc.

TMSE owns large sugarcane plantations in Mauritius and is involved in the production of specialised sugars. HFL is a holding company involved in sugar and alcohol production, as well as property management and electricity production.

Under the terms of the EU's new sugar protocol, the price of raw sugar has fallen a cumulative 36 percent to 336 euros ($475) per tonne compared to an original guaranteed price of 523.70 euros per tonne. (Reporting by Richard Lough; editing by Jon Loades-Carter)