What you need to know about Wilmar's latest Moroccan cash cow

It bought 27.5% stake for US$263m.

According to Phillip Securities, Wilmar has announced that it has purchased from Societe Nationale d’Investissement (SNI) a 27.5% stake in Cosumar S.A., a listed company on the Casablanca Stock Exchange, for an aggregate cash consideration of MA$2.3bn (US$263mn).

Subsequently, SNI will sell up to 26.5% in Cosumar to a consortium of Moroccan institutional investors, who together with Wilmar will own a controlling 54% stake in the sugar producer.

Here's more from Phillip Securities:

Cosumar is the sole operator in the Moroccan sugar industry through its two businesses: sugar beet & cane milling, and raw sugar refining. With an installed production capacity of 1.6mn MT per year, Cosumar is the 3rd largest sugar producer on the African continent.

According to Bloomberg, Cosumar’s PBT was MA$729.8mn (US$84.53mn) in FY12, and based on Wilmar’s acquisition price for 27.5% of Cosumar’s stake, the deal is valued at 11x P/E. We estimated Wilmar’s cost price for Cosumar to be MA$2,000 per share, at a 29% premium to Cosumar’s last traded price of MA$1,545.

This is still lower than the 57% premium which Louis Dreyfus paid to acquire loss-making Imperial Sugar for US$78mn in June 2012. We note that there appears to be a trend of acquiring sugar companies like the recent Savannah Sugar acquisition by Dangote.

In fact, China’s Bright Food is also looking to acquire overseas sugar firm. This Cosumar acquisition may be indicative that Wilmar wants to join the new ‘sugar’ wave.

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