| Sugar beet growers in Montana, Wyoming, Colorado and
Nebraska who are trying to buy Tate & Lyle LLC’s Western Sugar Co.’s
six refineries may be the only viable buyers for the plants.
And if that deal falls through, the attorney representing the growers
said the British company may close the plants, including one in Billings,
when the current contracts run out in two years.
Salt Lake City attorney Randon Wilson, who represents the growers, said
he talked two weeks ago with the Clive Rutherford, president of Tate &
Lyle’s Northern American operations, who said the company has decided
not to operate the refineries long-term.
Wilson said Rutherford told employees during a tour of the refineries
that the company wouldn’t leave them “high and dry” but wanted out
of the business.
Wilson said he believes that Tate & Lyle would complete its
two-year contract with sugar beet growers before liquidating assets.
Huntley area grower Leroy Gabel said he attended a meeting in Billings
last week with Wilson explaining the buyout and Rutherford’s comment
wasn’t mentioned.
“It was stated that they don’t want to continue to operate in the
long-term, but that doesn’t mean liquidating assets. It wasn’t that
strongly worded,” Gabel said.
A glut of sugar on the world market, collapsing prices in the United
States and a sharp decline in Tate & Lyle’s earnings and stock value
have driven the British firm to sell its North American operations in
sugar beets and sugar cane.
In mid-October, the company agreed to sell six sugar beet processing
facilities – including in Billings and Lovell, Wyo. – operating under
the name Western Sugar Co. The refineries employ 600 people and were
supplied by about 1,300 growers farming 193,000 acres of sugar beets this
year.
The sale prices was set at $78 million, less than the price Tate &
Lyle would receive by liquidating the properties, Wilson said. The
liquidation value of Western Sugar is estimated at between $150 million to
$160 million.
Wilson, who represents the growers through an organization called Rocky
Mountain Sugar Growers Cooperative, said Tate &Lyle has decided to
concentrate on corn sweeteners, rather than sugar beets and sugar cane.
The company is the largest producer of sugar-based sweeteners in the
world.
Meanwhile, Al Jones, a regional development officer for the Economic
Development Division of the Montana Department of Commerce, said recent
history in sugar refining in the U.S. supports the argument that Tate
& Lyle may close the refineries, if the growers don’t buy them.
“By the end of 2001, an estimated 70 percent of the sugar beet
refineries in the U.S. will be owned by growers,” Jones said. “We will
have half as many sugar beet refineries today than we did in 1990.”
Losing a refinery would hurt area growers, since it might be
cost-prohibitive to haul the product to another refinery. Jones said that
since area farmers rotate sugar beets with other crops, losing the sugar
beet refinery could hurt other aspects of agriculture.
“There’s a domino effect of damaging the malting barley business as
well as the cattle market, which could have a crippling effect in this
area which could really hurt agriculture,” he said. “For a fair number
of growers, that could mean losing the farm.”
Jones said it doesn’t appear that another buyer would step forward,
if the growers fail to complete the deal. He said sugar beet growers used
to sell their crop to pop manufacturers, but that, too, has changed.
“When they brought Coke Classic back, they actually dumped the sugar
and replaced it with high-fructose corn syrup, one of the many, many
recipe changes at Coke,” Jones said.
About 350 Montana farmers grow sugar beets under contract to Tate &
Lyle and the industry brings in more than $50 million a year in direct
economic benefits to the Billings area.
Wilson held four meetings to explain the sale with about 360 growers in
Montana last week and is holding similar meetings in Wyoming, Colorado and
Nebraska. He expects to talk to roughly half the sugar beet growers when
the meetings are completed by Jan. 11.
And Wilson said growers already are sending in their subscription of
$35 per acre to help fund the purchase.
In addition to the $35 per acre, growers must pay a $100 common stock
fee. An additional $150 per share will be due by Feb. 28. The rest of the
sale would be financed a $50 million dollars loan from a Dutch lender.
Gabel said the meeting that he attended in Billings helped to answer
questions that he had about the deal.
“The sales pitch was good. There are some drawbacks to investing in
the thing, but they appear to have made it attractive enough, so the
downside of investing is less than I thought,” Gabel said.
Wilson said the Western Sugar sale is on schedule to close by the end
of March.
In a separate deal, sugar beet growers supplying Holly Sugar Co.’s
refineries in Sidney, Torrington and Worland, Wyo., also are studying the
feasibility of buying the three refineries. |