Imperial Sugar Company sells Holly Sugar Subsidiary
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, Inc., a beet seed processor and marketer located in Sheridan, Wyoming.
18/08/05 Imperial Sugar Company 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, Inc., a beet seed processor and marketer located in Sheridan, Wyoming. Terms of the transaction include an estimated price of $50 million (adjusted based on actual working capital at closing), of which $2.8 million will be placed in escrow for 18 months from the closing date and an additional $1.0 million will be held in escrow pending the final determination of working capital.
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.
In addition to the cash proceeds, the sale is expected to reduce the Company's unfunded pension liability by approximately $13.0 million (based on the most recent valuation reported in the Company's September 30, 2004 Form 10-K) and related cash contribution requirements, capital expenditure programs (approximately $3.7 million will be spent in the current fiscal year on Holly Sugar operations) and working capital needs. As previously reported, Imperial's working capital requirements are seasonal and are primarily the result of its Holly Sugar operations. In the current fiscal year, these working capital requirements reduced the Company's liquidity by an average of approximately $40 million.
