China wants to swallow Chelsea

CSR's sugar business includes the Chelsea Sugar Refinery in Birkenhead, Auckland. Photo / Steven McNicholl

China's state-owned Bright Food is seeking to buy Australian conglomerate CSR's sugar business which includes the New Zealand Sugar Company, owner of the Chelsea brand and Birkenhead refinery.

Shanghai-based Bright said it had written to CSR's chairman seeking talks on a proposal under which its subsidiary, Shanghai Sugar Cigarette & Wine (known as Yantang) would buy the company's sugar and renewable energy businesses, which it values at not more than A$1.5 billion ($1.88 billion), in an all-cash offer.

Originally a sugar refiner, CSR is now a diversified conglomerate dominated by its building products division.

CSR is working to demerge its sugar business following pressure from shareholders including Sir Ron Brierley's Guinness Peat Group, which holds 5 per cent.

Bright Food said it hopes its offer will be "a much more attractive and significantly more secure alternative to the current plan by CSR Ltd to demerge its sugar assets".

Yantang chairman and Bright Food vice-president Ge Junjie said the company was keen to invest in the Australian food industry.

"We would welcome the opportunity to work directly with CSR Limited to discuss and hopefully finalise the details of a potential acquisition by Yantang of the sugar assets held by CSR Sugar," Ge said.

"This acquisition aligns with Bright Food's long-term strategy to build resource-related businesses which also include food related, dairy, wine and nutrition products."

A spokesman for CSR, whose shares rose as much as 8 per cent on the news, noted Bright's statement was "merely an expression of interest and does not make any proposal capable of acceptance by CSR".

The statement "indicates a number of conditions and approvals that would be required of any transaction were any proposal to be made and accepted".

CSR noted Bright had previously expressed an interest in its sugar business, which "similarly lacked certainty as to value, timing and likelihood of completion".

"CSR continues to progress the proposed demerger of its Sugar and Renewable Energy business and will consider a range of options as part of this proposal."

GPG's Gary Weiss told the Herald his company was not surprised by Bright's interest.

"We've recognised for some time that the value inherent within CSR's conglomerate structure was not being recognised by the market. It is for that reason that GPG presented a number of credible break-up proposals to the CSR board well before its decision to raise highly dilutive capital in November 2008 and in 2009.

"It is difficult to form a view in relation to Bright Foods' offer at this stage but we look forward to receiving more detailed information in relation to the demerger and indeed any other proposal that may maximise value for CSR shareholders."

New Zealand Sugar, operator of New Zealand's only sugar refinery, is currently owned by CSR in a joint venture with Australian cane growing group Mackay Sugar.

Bright said it noted CSR's proposal to acquire the remaining 25 per cent of its Australian and New Zealand sugar refining joint ventures from Mackay and was prepared to discuss a similar transaction with the company.

CSR's other business interests in New Zealand include building products and also glass company Viridian.

Bright Group is one of the largest food companies in the world and reported revenue of about US$7.1 billion ($9.6 billion) in 2008 and has more than 3300 retail outlets across China.

It is owned by various state holding companies, the largest holder being the State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government with just over 50 per cent.

CSR shares closed up 8.5c at A$2.05 on the ASX.