Tuesday, May 15, 2012

Global Sweeteners Acquires Equity Enterests in HFCS from Cargill

On 30 March 2012, Global Sweeteners Holdings Limited (Global Sweeteners) announced that it has signed a sale and purchase agreement with Cargill, Incorporated (Cargill) to acquire 50% equity interest in Global Bio-chem-Cargill (Holdings) Limited (Global Bio-chem-Cargill, a subsidiary of Cargill) and 10% equity interest in GBT- Cargill High Fructose (Shanghai) Co., Ltd. (GBT- Cargill) from the latter, with a total investment of USD4.2 million. In fact, GBT- Cargill was established in 2001 as a joint venture of Global Sweeteners and Cargill and it is engaged in producing F42. Upon the completion of the acquisition, these two companies will both become wholly-owned subsidiaries of Global Sweeteners, which will help Global Sweeteners to strengthen its operational efficiency and develop its high fructose corn syrup (HFCS) business, according to CCM’s May issue of Sweeteners China News.

The following reasons are mainly responsible for Global Sweeteners’ acquisition. Firstly, it’s the increasing market demand for HFCS that drives the company to acquire equity interests in HFCS companies. HFCS has been widely used in the food and beverage industry. Especially because of the surge of sucrose price in China since 2011, many food and beverage companies have switched to other sweetening ingredients and HFCS is considered to be a good substitute for sucrose. HFCS tastes better than sucrose and its sweeteness will increase with the drop of temperature. Besides, it costs less than sucrose does as a food additive. Therefore, the strong demand for HFCS drives Global Sweeteners' acquisition. In fact, to meet the huge demand from China’s food and beverage sector for sweetener products, except its previously existing F42 (F42 and F55 are two main kinds of HFCS) production facility in Shanghai, the company had also constructed a new F55 production line with capacity of 100,000t/a in the same production site and the construction was completed in Oct. 2011, and thus Global Sweeteners’ capacity of HFCS was up to 220,000t/a.
Secondly, Global Sweeteners acquires HFCS companies in order to improve its product structure. In view of Global Sweeteners, the HFCS joint venture with Cargill was a success and had helped Global Sweeteners and Cargill to pioneer in China’s HFCS market. However, F42 business of Global Sweeteners didn’t perform well, and its gross profit fell from USD2.5 million in 2010 to USD 1.4 million in 2011. Besides, F55 is used more and more widely and many users are switching to F55. In consideration of this, Global Sweeteners revealed that it is considering a range of options to revamp the existing F42 facilities, in order to either complement other production lines or to adjust its product structure.
Thirdly, the acquisition will increase Global Sweeteners’ cash level. According to the announcement, as of 29 March 2012, Global Bio-chem Cargill and GBT- Cargill have tangible assets of about USD4.4 million with no interest-bearing bank borrowing. The total cash balances in above two company amounted to about USD14.1 million while Global Bio-chem Cargill has dividend payable to Cargill which amounts to USD2.6 million. Thus directors of Global Sweeteners believe that the agreement will not only strengthen the management flexibility over the production planning, but also increase the company’s cash level.

According to Mr. Kong, the chairman of Global Sweeteners, the termination of the joint venture agreement will free the company to develop HFCS business according to its own strategies and at its own pace. Moreover, the sales and purchase agreement will enable the company to have full control over the F42 plant, which will allow it to better utilize the production facility and strengthen the operational efficiency upon the completion of the agreement.
Source: Sweeteners China News 1205

Content of Sweeteners China News 1205:
Output of Chinese food additives reaches 7.62 million tonnes in 2011
Nanning Sugar encounters net profit loss in Q1 2012
Annual National Conference of Sucrose 2012 held in Yunnan
Global sugar surplus to exceed 6 million tonnes
Food additive glycyrrhiza may withdraw from Chinese market
Shandong Longlive declares long-term development strategy
High concentration may promote China's sucralose industry in 2012
Saccharin facing possible elimination in China
Mogroside may become second most popular natural sweetener
Market overview of China’s HFCS till April 2012
Opinion solicitation for national standards of three sugar alcohols ongoing
Cyclamate industry impervious to food safety incidents
Sorbitol expansion of Tongchuang Biotechnology to complete in H2 2012
Crystalline fructose to be Xiwang Sugar's key development focus
Global Sweeteners acquires equity interests in HFCS from Cargill
… …

If you are interested in CCM International’s March issue of Sweeteners China News, please do not hesitate to contact us by +86-20-37616606, or email us at econtact@cnchemicals.com.

(Guangzhou China, May 7, 2012)

Sweeteners China News is a monthly newsletter published by CCM International Limited. Based on China market, CCM offers timely update and close follow up of China’s various kind of sweeteners market dynamics, analyze the market data and trends, Major columns include market dynamic, company dynamic, raw material supply, price update, import & export analysis, Consumption Trend & Competitiveness.

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