Proserpine Mill's furfural plant under review

The crop estimate for the Proserpine Sugar Mill is between 1.65 and 1.7 million tonnes which Proserpine Canegrowers Manager Mike Porter says may change slightly considering only half the farmers have completed their final estimates.

Sucrogen has released its early estimate as it moves towards finalising the maintenance program for the start of the 2012 crushing season.

Moving to dispel a rumour that the furfural plant is being dismantled and transported north to be used in some form at one of its four Burdekin mills, Sucrogen’s Executive General Manager for cane products Craig Doyle says a review of the furfural plant, including its processes and viability is currently being undertaken by an engineering firm.

"This investigation is not expected to be completed for several weeks and our key focus remains on completing the capital and maintenance program to ensure the mill is ready for the start of the 2012 crushing season.

Canegrowers’ Mr Porter says at this stage, Sucrogen seemed to be on the money with their estimate.

"It equates to around 80 t/ha which is getting closer to the district’s 10 year average. Not all growers have completed their estimates (less than half) so the final estimate may move around a bit but even with favourable weather, it would be unlikely to exceed the 1.7m tonne mark," he said. Up until the last big rain event, Mr Porter says the weather has been almost perfect for the crop.

"The dry start had an impact, but generally the monsoon season has been very favourable. Ideally, we would like to see a couple of weeks of sunshine with perhaps some follow-up rain after Easter.

"That would put the crop in a good position prior to the crush."

Sucrogen offers more money for Proserpine Mill

 Just days away from the members’ vote Sucrogen has announced an extra A$5 million, which will effectively increase net proceeds from the proposed sale of the Proserpine mill.

 “We are providing this extra A$5 million in net sale proceeds to ensure

members receive a greater financial return from the sale - now estimated at

A$38 million,” said Sucrogen CEO Ian Glasson.

 The extra $5million does not actually increase Sucrogen’s headline price but the company’s executive general manager for strategy and business development Shane Rutherford said headline price was not something members should be focussing on.

 “In fact you can actually have a higher headline offer which returns less to members in the end,” Mr Rutherford said.

 “What we’ve been able to do is come up with a way we can guarantee a $5million increase in net proceeds to members, but we are not prepared to disclose how we have done that at this point,” he said.

 “This is a genuine gesture to provide additional funds for members. It’s an absolute commitment. We’ve amended our arrangement with Proserpine. This is riskless, it’s in writing and it’s executed.”

 Proserpine’s members have until 5pm on Thursday to vote on Sucrogen’s offer to buy the mill. Should the offer be accepted, Sucrogen supports the Proserpine board in making an advance payment of up to A$15 million to members before Christmas

2011.

 “Members have told us they strongly support an advance payment of sale proceeds and we’re happy to sit down with the board to work through the process to see if we can make that happen,” Mr Glasson said.

Sucrogen warns Proserpine it's 'now or never'

 It’s “now or never” for Proserpine’s cane farmers according to Sucrogen CEO Ian Glasson, who says his company will not come back if the vote goes down on October 27.

 “We stayed in this process the first time because it was such a close vote, but a second “no” vote gives us a very clear message we’re not wanted. Our offer expires in October at the end of the (second) vote,” Mr Glasson said.

 Mr Glasson, who arrived in Proserpine on Sunday, said growers who focussed on a potential bidding war were playing a “dangerous game”.

 “It’s a bit like playing Russian roulette. They (the members) pulled an empty chamber because we happened to come back, but we’re not going to do that again. Quite simply a bird in the hand is worth an extra $2.8million in the bush,” he said.

 Mr Glasson has spent much of the past three days talking with growers, mill employees and members of the community, taking questions on topics such as the no-shop clause, asset sale agreement, warranties, and how Sucrogen came up with the magic “$115million” bid.

 Mr Glasson reiterated that $115million was a “fair and reasonable” price for a mill that requires a lot of work.

 “I’m sorry. I can’t put another $5million on the table. We’re business people. There isn’t more money to come. We understand mills. We’ve got to get a return on our investment. Beyond that we don’t make money,” he said, reminding members that after the crush the mill “starts to bleed $3million a month”.

 On the matter of denying access to other bidders, Mr Glasson said there was “absolutely a fair chance”.

 “We got rid of it (the no-shop clause). We stood aside and allowed Proserpine’s board to engage with Cofco. I understand Cofco looked at some 1,300 documents, which is more than us. I haven’t seen any of the Cofco offers but the advice from the independent experts is they still have not put a binding offer on the table.

 “The board are obliged to consider a binding offer. There isn’t one. If there’s a better offer you’re free to take it but the offer here is ours,” he said.

 “It’s very clear that if Cofco want to buy the business they need to make a firm, binding offer like ours,” he said.

 And finally, Mr Glasson said, “I don’t want to be party to something that’s destroying the community”.

 “I genuinely believe there is 75 per cent of people who can see the benefits of this so it would be very disappointing to see the vote go down

 “We want to buy it (the mill). We’re serious. Either say yes, or put us all out of our misery and good luck!”

Tully Sugar talks takeovers

 Tully Sugar’s chairman Dick Camilleri and CEO John King, joined Deputy Chairman John Amies on the ground in Proserpine last week. The three executives conducted further meetings with growers and the local community, citing comparisons with Cofco’s takeover of Tully in many of the conversations that occurred.

 “I think it’s fair to say Tully’s had a bit of experience with takeovers given the fact we’ve just been acquired by Cofco and that process was open and transparent,” Mr King said.

 “There were three bidders and the board and management negotiated with all of them and as a result of that the shareholders ultimately got a better result.

 “Ultimately the growers here will make their decision. We just think an open and transparent process would be in the best interests of all,” he said.

 Tully’s three executives had already left town by the time Sucrogen’s Ian Glasson arrived and an opportunity presented itself for a “round table” scenario at a shed meeting on Monday night.

 While Mr Glasson said publicly that he would be happy for Tully Sugar to attend, Tully’s executives said they would prefer to be contacted direct.

 “We don’t believe it is appropriate for us to attend Sucrogen’s grower meetings without a formal invitation from the company,” Mr King said.

 “We would very much support a joint forum, whereby Tully and Sucrogen present their offers to growers to give Proserpine members full visibility of what each bidder is proposing.

 "A Tully/COFCO representative has left messages on Mr Glasson's mobile and his office phone in Sydney and I have written to him to formally invite Sucrogen to jointly host a forum with us for growers in Proserpine at a mutually convenient time.

 “We look forward to Mr Glasson's response and to continuing to engage Proserpine growers through a joint forum in the very near future,” Mr King said.

 “Tully/COFCO is committed to securing the best offer for Proserpine’s members and supports a full, open, honest and transparent process - a joint forum is a good step in this regard," he said.

Proserpine Sugar Mill compares bids

 The battle for Proserpine’s sugar mill is far from over, with major players Wilmar-backed Sucrogen and Cofco-backed Tully Sugar, now engaged in what some growers are calling a “two horse race”.

 The PCSMA’s board of directors called a meeting at the Entertainment Centre last Thursday morning to explain the co-operative’s position thus far. Prior to the meeting the board had engaged the services of former Mackay Sugar and QSL chief executive John Pollock to provide an independent assessment of what were then considered to be very different bids.

 Based on Mr Pollock’s advice the PCSMA board continued to recommend Sucrogen, saying theirs was the “superior” offer, but at 4.30am on Thursday, Cofco/Tully Sugar upped the stakes, putting in a revised bid.

 Proserpine’s acting CEO Ian McBean said the board decided to run Thursday’s meeting in spite of the new twists and turns.

 “We decided to take the opportunity to provide members with information on not only why we couldn’t accept the Tully/Cofco offer the first time around, but also to give them some insight into the detail and complexity of this and the fine line the board has to tread,” Mr McBean said.

 Mr McBean says Tully/Cofco’s revised offer means the board must go through a comparison process yet again.

 “We have an asset sale offer for $120 million from Tully/Cofco and we have an asset sale offer for $115 million from Sucrogen, but at the end of the day it’s not about the top dollar value, it’s about the actual return to the members,” he said.

 Under Proserpine’s current contractual obligations, if the Tully/Cofco offer is deemed superior, Sucrogen has five working days in which to decide whether to match the $120 million bid. As the Guardian went to press on Tuesday afternoon, a decision by the board had not yet been made, but Tony Jeppersen, like many of the members who attended Thursday’s meeting, said he looked forward to a reasonably speedy conclusion.

 “The critical thing that all members and parties bidding now seem to appreciate is that the timeline is the most crucial part of this process,” he said.