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.

Proserpine's second Sucrogen vote draws near

 Proserpine’s co-operative sugar mill may be one step closer to being sold. A spokesperson for PCSMA confirmed the notice of meeting (for a second Sucrogen vote) has now been lodged with the registrar and the distribution of paperwork to members is expected to occur within a matter of days.

 Sucrogen’s CEO Ian Glasson will be visiting Proserpine next week, meeting with mill employees and local business owners as well as holding informal face-to-face sessions for PCSMA members at the Proserpine RSL. The sessions will be held from 9am to 11am and again from 2 to 4pm on Monday October 10, giving members the chance to ask any questions they might have about Sucrogen’s offer to buy the Proserpine mill.

 “People don’t need an appointment. They can just walk in off the street. Our offer will give Proserpine members the best outcome, so we’re keen to ensure they have all the facts,” Mr Glasson said.

 PCSMA’s electrical engineering manager Steve Ischenko, who previously worked for Sucrogen (then CSR Sugar), said there would be huge benefits to becoming part of a larger company.

 Mr Ischenko said while it was not his place to dictate how PCSMA members should vote, he thought it was good news when Sucrogen announced its interest in the mill.

 “I thought - this is great. This is just what we need,” he said.

 Mr Ischenko said whatever decision members made, the sooner they did it, the better.

 “It’s important it’s finalised before the maintenance season starts. Once the crushing’s over, we starting dipping into the profits,” he said.

Second chance for Sucrogen vote

 Sucrogen’s CEO Ian Glasson has confirmed the sugar subsidiary’s offer for Proserpine still stands, with members of the PCSMA soon to be given another opportunity to vote.

 “Growers have been proactively contacting Sucrogen requesting that we maintain our offer and we’re delighted to now be able to get to that point,” he said.

 Mr Glasson said it was his understanding the second ballot would proceed in a similar fashion to the first, whereby a notice of meeting would be issued and members given 21 days in which to vote.

 Mr Glasson told the Guardian that the timing of the new vote, which would most likely coincide with the end of the crush, around late October or early November, meant that although the company’s $115 million bid was effectively the same, growers would actually receive a greater return.

 “Although Sucrogen’s offer has maintained the same headline price the net sale proceeds to growers should increase significantly due to the extra cash in the business at that time. Effectively Sucrogen would forego those proceeds. We’re giving that money up so it’s quite a big concession on our part” he said.

 Mr Glasson said Proserpine’s board had been released from any restrictions over the past two weeks, so they could intensely review alternative offers.

 “It’s our understanding they spoke with Mackay Sugar and Cofco at length. It’s something we encouraged in the interests of full transparency.

 “Basically we’re back to where we were. The offer that’s on the table is ours and the board has a process for dealing with any other approaches,” Mr Glasson said.

 Proserpine’s board is once again recommending the Sucrogen offer to members, having now enlisted the former CEO of Mackay Sugar and QSL, John Pollock, to review both offers (Sucrogen’s and Tully Sugar’s) and provide an independent opinion.

 Mr Pollock says he has “reached the opinion that the Sucrogen offer provides members the better return and greater certainty that a sale can be completed in a reasonable timeframe.”

 Meanwhile Tully Sugar says it is disappointed with this response. COFCO Australia Deputy Chair Keith De Lacy says the company will now “consider its options”.

 “We will also seek feedback from the Proserpine Board as to why our proposal was not considered superior,” he said.

Hope on the horizon for Proserpine's canegrowers after voting the Sucrogen offer down

A week has now passed since Sucrogen’s $115million bid for the Proserpine Sugar Mill was voted down, but hope may be on the horizon.

 By ten past nine the meeting was over. Some 50 stunned farmers listened while board chairman Lou Raiteri announced that the Sucrogen deal had gone down - before rushing from the entertainment centre without answering questions.

 Outside the venue, small groups of farmers - some who voted yes and others who voted against the sale - discussed the future of the mill and what they thought would happen next.

 Warren Watts and Ambrose Vickers agreed many of the growers had been bullied into voting.

 “We’re disgusted with how it has all been handled … there has been so much secrecy,” Mr Watts said.

 Andrew Stuart was talking with Ian Greenwood who has been supplying the mill for just under 100 years.

 “We’re elated with the way the vote went. At least now it might have opened it up for bidding. Given everyone a fair chance now,” Mr Greenwood said.

 Just hours later, the Guardian understands a meeting occurred between Proserpine and Cofco-backed Tully Sugar, who said they respected the growers’ decision in voting the Sucrogen offer down.

 COFCO Australia deputy chairman Mr Keith De Lacy said Tully Sugar would immediately engage with the Proserpine Board (now that the Sucrogen offer restrictions had been removed) to ensure the loan facilities to support the mill were put in place as soon as possible.

 “We’ve had a meeting with the board – it was a very constructive meeting. They’ve given us access to due diligence and we believe we can work well together in going forward,” Mr De Lacy said on Wednesday afternoon, adding, “We’ve got no intention of precluding any other bids. It’ll be an open process from here on”.

 Meanwhile the Proserpine board has been ominously silent since the results of the ballot were announced.  Yesterday the board issued a short statement to members announcing it had been able to “stabilise the Mill’s financial situation until at least this Friday 9 September through a combination of initiatives.”

 Acting CEO Ian McBean says under the interim arrangements that have been agreed, the Sucrogen loan is now not payable until after Friday.

 “In the meantime, the Board is talking to a number of parties with the intention of bringing another option to Members by the end of this week.”

A message from the Proserpine Mill

 Proserpine Sugar Mill’s Acting CEO Ian McBean has this message for growers:

 “There is no guarantee that Mackay Sugar can or will make an offer for Proserpine, let alone a superior offer to the one from Sucrogen. For Mackay Sugar to encourage Proserpine members to vote “no” to the Sucrogen offer in the absence of another offer is irresponsible. Mackay Sugar is asking Proserpine members to sacrifice the real offer that would return approximately $25 million to members for nothing in return,” Mr McBean said.

 “What Mackay Sugar has done is outline a concept that would still result in our members losing control of their Mill for less up front cash and which would take more time and money to deliver, which the Mill cannot afford,” he said.

 Mr McBean wants growers to appreciate there are significant hurdles to be overcome before what Mackay Sugar has outlined could be even be implemented. These would include 75 per cent of Proserpine Mill members agreeing to convert their Cooperative to a public unlisted company; at least 75 per cent of Mackay Sugar shareholders agreeing to sell 25 per cent of their company to the French commodities trader, Louis Dreyfus; additional approvals that may be required from Mackay Sugar shareholders to issue shares to Proserpine growers; and Mackay Sugar being able to secure the necessary finance.

 “This will all take considerable time and passes all of the risk, which is significant, to the Proserpine growers,” Mr McBean said.

 “Mackay Sugar is asking Proserpine members to put everything at risk and vote “no‟ to the Sucrogen offer but cannot provide a firm alternative that is superior to the offer on the table.”

 Mr McBean said the Proserpine Mill was required to reduce existing debt by $35 million by 31 October 2011.

 “The Proserpine Board has run an orderly process to repay debt and secure the future of the Mill by the end of October. Mackay Sugar cannot commit to provide a superior offer to meet that timeframe,” Mr McBean said.

 Mr McBean pointed out that Mackay Sugar had been given the same opportunity as other prospective investors and that claims they had been “locked out” of discussions were untrue.

 “Mackay Sugar were given the same opportunity as Sucrogen and seven other potential investors but chose to opt out – we can only assume because they thought Tully Sugar was a better option,” he said.

Mackay Sugar mulls over meeting with Proserpine cane growers

 Chairman of the Mackay Sugar board Andrew Cappello came here last week, to gauge the appetite of Proserpine growers for a potential merger with Mackay. Now, after Thursday’s meeting Mr Cappello says he has a fair idea of what growers want.

 “We have a lot of contacts with the grass-roots growers and we did what they requested, which was to come up and provide the framework to what our model would look like. Yes, it’s difficult for them at this stage to compare this with the offer from Sucrogen, but this is what our business model would be and that’s what they have to decide on,” Mr Cappello said.

 “The clear message we got was they want some sort of guarantee that we could sure up their financial position if they voted the Sucrogen offer down. We would like to guarantee them 100 percent but it’s still early days. As we move closer to the voting date I’m sure we will be able to provide them with more certainty."

 Mr Cappello denied claims that Tully took precedence over Proserpine by those who believe Mackay Sugar has come forward with too little too late.

 “Tully came on the scene earlier than Proserpine but it was always our intention to involve the three mills in one larger milling company,” he said.

 Mr Cappello maintained that at this stage there would be no cash offer comparable to the $115million Sucrogen bid, saying, “Our offer is about the merger”.

 “Our interest in Proserpine is always about involving the growers. It’s a much more stable business model, where your suppliers are the owners."

 Mr Cappello said if nothing else, the visit by the board had served to dispel any misinformation and give growers something else to think about.

 “I think there’s a reasonably good acceptance of our model. The growers can see there’s a lot of upsides for them in our offer, eg the cane payment formula and also in the furfural earn out – as the furfural plant proves itself they will be able to acquire more value. However there are still some growers who want to compare eggs with eggs,” he said.

Foreign bid for Proserpine Sugar Mill

Proserpine mill’s chief executive officer John Power said if Proserpine was to remain a single entity, and not join forces with Sucrogen, then another bad season would spell the end of the local industry.

“There are too many risks for the mill to remain a single entity in the future. There are 12 new sugar refineries that have been built in Asia in the past few years. The face of Asia is changing and we need to be part of big business to remain viable. No refinery wants to deal with a small mill anymore,” Mr Power said.

Refusing to be drawn on whether furfural or the nature plant project had anything to do with the current debt, Mr Power said all these details would come out in the independent report which would be mailed to growers within the next month.

He said to reduce the risk of the Proserpine mill becoming a victim of an ever-changing global market, the board went looking for a positive way forward to secure the future of the industry and the livelihood of the town.

“Sucrogen will return a lot of the land to cane. We have the capacity to crush well over 2 million tonnes here. Their investment could take this mill to the third biggest in the country,” he said.

“If you want a sustainable future, you need supply,” he said.

Mr Power’s comments about Sucrogen buying land at Plains Creek, returning it to cane and partnering up with cane farmers, was met with sceptism by grower Paul Atkinson.

“I have spoken with a few mates of mine down there and this just isn’t true. It’s not a partnership. It's a dictatorship, they tell you when to plant, when to cut, when to do everything. It’s not true,” Mr Atkinson said.

However Mr Power remains positive about Sucrogen’s investment believing it will be a real coup for the Whitsundays.

“They are a good fit for Proserpine,” he said.

The Great Cane Robbery

The sugar industry, that has kept the town of Proserpine alive and prosperous for well over a century is on the brink of a $140 million debt, around $10million of which rests in the Proserpine area.

 Due to what local farmers are calling a "sweetheart deal" between the Proserpine Sugar Mill and Queensland Sugar Limited (QSL) over shortfalls in sugar from 2010, approximately two-thirds of this debt could be passed to the growers – a debt they say is not theirs to pay.

 General Manager of the Australian Cane Farmers Association (ACFA) Stephen Ryan said, “The issue is that some people are going to go bankrupt over this”.

 Manager of Canegrowers Proserpine Mike Porter said, “I wouldn’t like paying $10 million either. “Yes the growers are starting to complain and quite rightly so. They need to have answers about what went wrong”.

 “What this comes down to is who owns that debt. The mill is prepared to accept some but not all of it.

 “Who is to blame? Is it the growers because they couldn’t deliver? Or is it the mill because they overstated or didn’t reduce the estimate down? Who is responsible for a weather event?”

 Mr Porter said his organization had been dealing with the mill for around eight weeks to try to resolve the issue of ownership of that debt.

 “We have yet to receive legal confirmation that that the growers are responsible for that debt.

 Local cane farmer Bob Bennett maintains the debt should belong to the mills and QSL.

 “This debt has come about through non-delivery and poor forward estimates by the mills coupled with an aggressive forward selling regime by QSL. We as growers had no access to the Raw Sugar Supply Agreement (RSSA).

 “We’ve basically got a non-disclosed contract overriding our supply contracts that could cost us the shirts off our backs if the mills have their way.”

 Fellow farmer Trevor Biggs asked, “At what point does the responsibility shift to the mill? If you can go back to your supplier at any time to recover your losses you can’t go broke. This is unconscionable conduct at its worst.

“We believe the capital reserves on balance sheets at the mill should be utilized for this bill. There’s too many marginal growers that can’t sustain this sort of a hit,” Mr Biggs said.

 CEO of the Proserpine Co-operative Sugar Milling Association John Power held firm that this was an industry debt and the industry as a whole should be prepared to pay.

 “They (the farmers) get two-thirds of the revenue and they get two-thirds of the risk,”

 “This has been a constant for many years. Unless people want to change the split of revenue sharing why would anyone in the milling industry take on more risk?

 “The risk has always been there, but it took the terrible rainfall of 2010 to bring it out.

 Mr Power said QSL have committed to discussions, starting next month, which will look at how the pools operate both now and in the future.