US sugar processor Imperial Sugar has announced that it has signed a definitive agreement with Southern Minnesota Beet Sugar Cooperative, a sugar processing cooperative based in Renville, Minnesota, to sell Imperial's Holly Sugar Corporation subsidiary.

A September 2005 closing is anticipated, subject to completion of environmental due diligence and customary regulatory approvals.

Holly Sugar's primary operations include two beet sugar factories, located in Brawley and Mendota, California, a distribution facility located in Tracy, California and Holly Hybrids, a beet seed processor and marketer located in Sheridan, Wyoming. Terms of the transaction include an estimated price of US$50m (adjusted based on actual working capital at closing).

Holly Sugar, which represents approximately 15% of Imperial's production capacity, primarily services customers in the industrial and foodservice segments. The company's cane refineries located in Savannah, Georgia and Gramercy, Louisiana, which are unaffected by this sale, also service these market segments as well as major retail customers through the company's strong Imperial and Dixie Crystal consumer brands, along with numerous private label offerings. Imperial will continue to own the Holly brand, which is sold in certain of its business segments, including to certain retail customers.

"This transaction allows us to somewhat reduce the commodity nature of our business, focus our attention on our core cane refineries and our value added retail and foodservice strategy, and increase the cash flow potential of the company's operations. The decision was also influenced by current conditions in the sugar industry caused by historically low margins and high energy costs that are particularly significant at these California plants," said Robert Peiser, Imperial's president and CEO.