Associated British Foods has reached an agreement to take full ownership of South African sugar business Illovo Sugar. 

The UK-based food maker has secured the backing of Illovo’s board to buy the 48.65% of outstanding Illovo shares that it does not already own for a total consideration of ZAR5.6bn (US$368.2m), or ZAR25 per share.

ABF has held a majority stake in Illovo since 2006. The company initially tabled an offer of ZAR20 per share to take full control of Illovo in February

“The agreed offer price is in line with the preliminary fair and reasonable opinion provided by the independent valuation expert retained by the Board of Illovo, Rand Merchant Bank, a division of FirstRand Bank Limited,” ABF said in a regulatory filing. The deal is expected to be immediately accretive to ABF’s earnings. 

Illovo is the largest sugar producer in Africa, holding leading positions in South Africa, Malawi, Zambia and Swaziland and “a strong presence” in Mozambique and Tanzania. Announcing the deal, ABF described Africa as a “growth market” for sugar due to its growing population and rising incomes. 
“Illovo is well positioned to capitalise on this growth although high global sugar stocks, low world sugar prices and forthcoming changes to the EU sugar regime have created a challenging trading environment,” ABF said. 

The company added that it also expects to “accelerate” commercial developments and performance improvement programmes. 

The deal is subject to shareholder approval, with an extraordinary shareholder meeting scheduled for May. ABF said it has already received the backing of shareholders representing a majority of shares not already held by ABF.