Riyadh, Oct 25 - London-based Tate and Lyle Plc's has agreed to sell its minority stakes in Egyptian and Saudi sugar units to its Saudi-based partner, Savola Group , which bets on soaring sales from the units this year.
The value of the deal was not disclosed, but Dubai-based Shuaa Capital said it could be worth 240 million riyals ($64 million) as it expects it to add 20 million riyals to the full-year net profit of Savola, the Middle East's biggest sugar refiner.
Savola said the agreement covered the purchase of the British sugar refiner and sweetener group's 3.58 percent stake in a sugar refinery in Egypt and a 9.68 percent stake in another refinery in Saudi Arabia.
Savola already holds a 64.8 percent stake in the Saudi sugar refinery which has an annual production capacity of 1.2 million tonnes and a 53.5 percent stake in the Egyptian refinery which can produce up to 750,000 tonnes per year.
Turnover from the two units is expected to rise 41.5 percent this year, Zouhair Eloudghiri, chief executive of Savola Foods, told Reuters. Savola Foods is 90 percent owned by Savola.
'This year, the two refineries should generate a turnover of 3.48 billion riyals ($928 million) up from 2.46 billion riyals in 2008,' Eloudghiri said.
'Tate and Lyle wants to focus on sugar within Europe and on the production of starches, sweeteners and ethanol.'
Laurent-Patrick Gally of Shuaa Capital described the development as 'a minor positive given the recent pick-up in Savola's sugar operations profitability'.
Shares in Savola slid 0.33 percent after the announcement.
'Excluding financing costs implication, such a transaction could add 20 million riyals to Savola's bottom-line on a full-year basis,' Gally said.
This increase would represent 2.4 percent of Savola's forecast of a net profit of 846 million riyals for 2009 excluding any capital loss or gain, Gally said.
'Assuming a 12 times P/E multiple for the acquisition would also imply Savola would spend 240 million riyals on the combined stakes,' he added.
Savola has teamed up with Turkish and Saudi partners to bid for six sugar mills being sold by the Turkish government.