What you need to know:
- In January 2013, Alteo Limited, which was formed in 2012 after a merger of two Mauritius sugar producers — Deep River Beau Champ Ltd and Flacq United Estates Ltd — said it was in talks with potential investors to run a number of sugar projects in East Africa.
- The development now brings to two the number of Mauritius-based sugar producers eyeing Kenya’s sugar sector, which has for years enjoyed protection from uncontrolled competition through Comesa safeguards.
Mauritius’ largest sugar miller, Alteo Limited, is set to acquire a majority stake in Transmara Sugar Company in what is set to shake up the regional industry.
The firm has announced that it has completed due diligence, paving the way for it to acquire a 51 per cent stake in Transmara-based processor at a yet-to-be disclosed fee.
“Alteo has signed a non-binding heads of terms for the proposed acquisition of an affective stake of 51 per cent in the share capital of Transmara Sugar Company Limited, a Kenyan company operating a sugar mill in Transmara,” the firm said in its cautionary statement to the Mauritius stock exchange in 2013.
The transaction is subject to the fulfilment or waiver of certain conditions including regulatory approvals in Kenya. The deal is expected to be completed by end of June.
In January 2013, Alteo Limited, which was formed in 2012 after a merger of two Mauritius sugar producers — Deep River Beau Champ Ltd and Flacq United Estates Ltd — said it was in talks with potential investors to run a number of sugar projects in East Africa.
COMMON MARKETS AGREEMENT
The development now brings to two the number of Mauritius-based sugar producers eyeing Kenya’s sugar sector, which has for years enjoyed protection from uncontrolled competition through Comesa safeguards.
Currently, Kenya is enjoying the extended Common Market for East and Southern Africa sugar import quotas for the fifth time, on grounds that the local industry is unable to compete with cheap sugar from the 19-member trading bloc.
Alteo’s entry could further unsettle struggling state-owned millers such as Mumias, which is still finding its way out of a financial crisis.
Another Mauritian sugar company, Omnicane, owns a 25 per cent stake in Kwale-based miller. The other stake is held by family-owned company, Pabari Investments.
However, Omnicane has the option of growing its stake to 50 per cent in the Kwale–based sugar firm and bolster its grip in the local sugar business.
The original owners of Kwale International Sugar Company Limited sold 25 per cent stake to Omnicane at Sh1.7 billion ($20 million) in early 2013.
The entry of two of Mauritius biggest millers is bound to shake the market dominance of Mumias Sugar, which has been put under statutory management owing to massive debts and management woes.
The sugar industry in Mauritius is very competitive thanks to modern production technology. The two firms are expected to replicate this model in Kenya, a plan that is expected to give local millers a run for their money.
Industry analysts foresee Alteo shaking the country’s sugar industry considering the vast lands in Transmara, which would give it access to large quantities of raw materials, a vital element that has been lacking in Western Kenya sugar belt therefore affecting the productivity of millers
“The best cane and sugar yields in Kenya are realised in the Transmara sugar zone in Narok County, at rates of two to three times some of the lowest producing regions based in Western Kenya,” said Standard Investment in a note to investors.
Like the Kwale-based miller, which said it would rely on its nucleus estate to supply it with sugarcane due to availability of vast land, Alteo is also likely to benefit from a similar approach.
According to Standard Investment, Transmara Sugar Miller currently has the capacity to produce at least 400,000 tonnes of sugar per year, and has the potential to increase it to over one million tonnes in the next three years.
Alteo is listed on the Stock Exchange of Mauritius as an investment holding company whose core activities include sugarcane growing, sugar milling, energy production, property development and hospitality.
Alteo also has presence in Tanzania through its subsidiary — Sukari Investment Company — with interest in renewable energy production in Tanzania and the rest of the region.
Sukari Investment, which is owned by Deep River Beau Champ Ltd, controls 75 per cent stake at Tanganyika Plantation Company Ltd, where it grows 8,000 hectares of cane and produces about 90,000 tonnes of sugar annually.
Kenya’s sugar production is dominated by loss-making, debt-laden State-owned sugar firms such as Mumias, Nzoia, Sony, Muhoroni and Chemelil.
Private sugar processors include West Kenya, Soin, Kibos, Butali, Kwale sugar and Sukari industries.