Illovo Sugar Rises Most in Two Decades as AB Foods Lifts Offer

  • AB Foods offers $370 million for remaining 49% of Illovo
  • British company already controls Africa-focused sugar producer

Illovo Sugar Ltd. surged the most since 1994 after Associated British Foods Plc increased its offer to buy a stake that it doesn’t already own in the African producer for 5.6 billion rand ($370 million) to expand the U.K. company’s agriculture business.

AB Foods, which holds a 51 percent stake of Mount Edgecombe, South Africa-based Illovo, offered 25 rand a share to minority shareholders, valuing the company at 11.5 billion rand ($757 million), the companies said in a statement Friday. The London-based owner of Kingsmill bread and discount clothing retailer Primark offered 20 rand a share in February.

A buyout of Illovo would bolster AB Foods’ portfolio of sugar businesses, which include operations in the U.K., Spain and China. Over the past two years, the company’s profits from the commodity have dwindled as prices fell.

“Africa is a growth market for sugar, driven by increasing populations and rising incomes,” the companies said. “Illovo is well-positioned to capitalize on this growth. Full ownership will accelerate Illovo’s progress in these areas.”

Stock Surge

Shares in the South African company surged as much as 18 percent, the most since August 1994, and were 16 percent higher at 23.80 rand by 9:29 a.m. on the Johannesburg Stock Exchange, the highest since April last year. AB Foods gained 0.5 percent to 3,405 pence in London.

The countries where Illovo operates include South Africa, Malawi, Zambia and Mozambique on a continent that consumes more of the sweetener than it produces. AB Foods aims to generate a pretax return on its Illovo investment of more than 10 percent over the next few years, the company said in February.

“Shareholders representing a majority of the Illovo shares not owned by ABF have provided undertakings to vote, or to recommend to their clients to vote, in favor of the scheme,” ABF said in a separate statement Friday.

Illovo’s investors will vote on the offer in May, the company said.

AB Foods’ earnings have largely stagnated since 2013, as plummeting net income in the company’s sugar-production business has offset the growth of Primark, which expanded into the U.S. last year, and other units. The company said in January that profit in the year through September will show a “modest decline,” as the weakness of emerging market currencies weigh on the business.

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