Bunge is struggling to sell its sugar trading operations, frustrating the 200-year-old agricultural merchant’s strategy of slimming down to focus on core areas and improve profitability. German sugar refiner Nordzucker and Singapore-based agribusiness firm Wilmar International were among parties that had been initially interested, but nothing has materialised, according to the sources.
Sale difficulties risk complicating Bunge’s plan, announced by CEO Soren Schroder in February, to exit global sugar trading and distribution to concentrate on its core grain and oilseed operations.
It said at the time it had identified “a few interested parties” in the sugar division.
US firm Bunge, which itself has been a reported takeover target from rivals Archer Daniels Midland and Glencore over the past year, declined to comment.
Wilmar said it had not held talks with Bunge over the sugar trading business, but declined to comment when asked if it had considered acquiring the unit.
Bunge’s move to exit sugar trading followed a $69 million group loss in the fourth quarter, which compared with a profit of $262 million a year earlier, the latest in a series of poor results.
The lack of strong buyer interest in the sugar unit also illustrates the wider malaise facing the industry, where a supply glut has driven down prices, squeezing Bunge and its global competitors.
Louis Dreyfus Co is restructuring its sugar subsidiary in Brazil, for example, while German sugar group Suedzucker issued a profit warning this week.
The two sources, who declined to be identified because the discussions are private, said Bunge targeted a value for the unit, excluding debt, of around $75 million, which suitors deemed too high for what was on offer.
One said if Bunge could not find a buyer, it would have to wind down the operation.
The lack of appetite for sugar assets and tough market conditions could also complicate separate plans by Bunge to divest its larger Brazilian sugar-milling business via a flotation, according to the same source. The business is expected to be valued at between $1 billion and $2 billion.
“The IPO of the sugar mills also seems unlikely as in this market environment, it would be difficult to find investors ready to support it,” said the source. “Bunge had been trying to sell the mills and the trading unit at the same time, but the price expectations were a stumbling block.” — Reuters
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