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's vision splendid for Proserpine mill

The 2012 crushing is going to be one of the best in the industry for many years.

This bright forecast comes from the Executive General Manager of Sucrogen Cane Products Craig Doyle who is this week reiterating his company’s pledge to boost cane supply to the Proserpine Mill to over 2 million tonnes within three years.

"The weather is good, the price is good and the crops around Proserpine are looking fantastic," says Mr Doyle who confirms the four massive parcels of land pulled from auction at the eleventh hour before Christmas are most certainly on Sucrogen’s wish list.

"We are still discussing the finer details of the contract so I cannot say too much now. But all going well we hope to have secured the properties within two months. Sucrogen remains committed to finding ways of working with growers to boost productivity at the mill. So whether we get farmers in the area to lease the ground or whether Sucrogen manages them, we’re not certain. It’s still really early days," he said.

The 400 hectares of potential cane land at Gibson Creek – a block of land purchased by the mill some five years ago – is also at the centre of Sucrogen’s vision.

"The board had a plan to increase the yield from what they grew last season which was about 17,000 to 50,000 on this block. This was their vision! There just wasn’t the money there to back it up. But Sucrogen sees no reason why we can’t continue this plan."

Mr Doyle says while the relationship between grower and miller was never smooth sailing, he was hoping for a top future with great working relationships.

"We are nothing without the growers, and the growers would be stuck without a good, working mill. I can’t work miracles and I can’t promise it will be 100 percent complete before the beginning of the crush but I will do my absolute best to get the mill up to scratch and make sure the bins are on the line when it comes time to cut."

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'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.

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.

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.