Sugar cane harvesting.
Sugar cane harvesting. Peter Carruthers

Negotiations ongoing in Mackay Sugar recapitalisation

SENIOR management of German sugar manufacturer Nordzucker AG have visited the Mackay region as negotiations regarding the recapitalisation of Mackay Sugar continue.

On Thursday, Mackay Sugar's 'emerging growers' met with the supervisory board and senior management of Nordzucker AG.

Mr Day said the Nordzucker representatives were in the region to visit Mackay Sugar operations, infrastructure and cane farms, and had "enjoyed a good level of interaction with growers throughout the Mackay Sugar growing area".

He said they also had the chance to meet with, and get to know, some of the industry's emerging growers and potential leaders.

"We had a large group of younger growers come to meet the Nordzucker delegates and they were very interested in what they had to say," Mr Day said.

The visit from the firm, which has 18 production and refinery facilities across Europe and produced 2.7megatonnes of refined sugar in 2017/18, comes after Mackay Sugar in October announced it had received a non-binding indicative proposal for recapitalisation from the Braunschweig-based firm.

At the time, Mackay Sugar CEO Mark Day said the proposal remained subject to finalising a binding agreement, with Mackay Sugar agreeing to an exclusivity period until the end of December this year. If successful, the deal will see the agreed funds used for capital improvements on mills, as well as a two-stage repayment of the $2/tonne levy to growers.

The offer is a major step forward in Mackay Sugar's recapitalisation process, although the final amount of equity and/or debt to be contributed by Nordzucker is still to be agreed.

"Nordzucker has a long and successful sugar history in northern Europe with a heritage very similar to Mackay Sugar's grower-owned shareholder base, dating back to the early 1800s," Mr Day said.

While the non-binding indicative proposal has received in-principle support from the board of Mackay Sugar, it remains subject to a number of financial, regulatory, legal and shareholder-contingent conditions.

Mr Day said a series of shed meetings was held last month to discuss the proposal directly with growers and shareholders, who were being kept informed of the process as it developed.

"Ultimately, the Mackay shareholders will have to vote in support of the final bid from Nordzucker, for the proposal to be successful," he said.

"The board welcomed the chance to meet with growers and shareholders, and discuss this important opportunity, which is vital for the future prosperity of the sugar industry in Mackay region."

The transaction is scheduled to be completed in late March 2019, subject to an agreement being reached between the parties and the timeliness of all necessary approvals.