The rice deal could be a prelude to Ebro taking a 10% stake in SOS

The rice deal could be a prelude to Ebro taking a 10% stake in SOS

SOS Corporacion Alimentaria is to sell its rice division to Spanish food group Ebro Foods for EUR195m (US$261m).

The deal, announced today (25 November), could also lead to Ebro taking a 10% stake in SOS, which is selling EUR200m worth of shares to help restructure its debt and fund expansion.

Announcing the sale of the rice business, the SOS board of directors said the cash will help the company reduce its debt, as well as concentrate on the development of its core business, olive oil.

The SOS board said the group will also look to improve its competitive position in its main markets of Spain, Italy and the US, as well as the emerging markets of Brazil, China and Japan.

Ebro said SOS's rice division will "complement" its own rice business in Spain and the US, as well as "opening doors" to the Dutch market and "reinforcing" its position in other European markets and the Middle East.

If the deal is approved by SOS's creditors, Ebro will also pay EUR50m to take part in a capital hike that SOS is carrying out, giving it a stake of around 10% in the olive oil maker.

This will enable Antonio Hernandez, president of Ebro, and Demetrio Carceller, director of Ebro, to join the board of SOS.

Hernández said: "This is a wonderful opportunity to acquire an interest in a company which, apart from being world leader in its sector, operates in markets with enormous growth prospects. We believe the SOS Group has potential to further improve its productivity and efficiency, continuing the trend it has followed in recent months, despite operating within a restrictive financial framework and in a generally adverse economic context."

The transaction is expected to close during the first months of 2011.