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Macquarie, the Australian bank, has increased its footprint in the raw materials business by buying a 42.5 per cent stake in Czarnikow, the London-based sugar merchant.
The move comes as an increasing number of companies are eyeing agricultural commodities amid the rise in food prices and increasing demand from emerging economies such as China.
The sugar market has traditionally been dominated by large trading houses – including Cargill, ED&F Man, Groupe Sucres et Denrées (Sucden) and Louis Dreyfus – but has seen new entrants as the industry broadened thanks to the ethanol market.
The valuation was not revealed, but recent deals in agricultural traders have valued targets at 10 to 20 times earnings. In 2011, Czarnikow posted after-tax profits of $5.8m, less than half that of 2010.
Macquarie bought the stake from Wilmar International, the Singapore-listed commodities trading house.
In 2010, Wilmar paid $1.47bn for Sucrogen, the sugar and biofuels unit of Australia’s CSR, which also owned the Czarnikow stake. Wilmar also hired Jean-Luc Bohbot, the former head of trading at Sucden, last year.
The Australian bank’s commodities trading covers a wide range from agriculture to metals to freight. It recently started trading sugar in the physical market to meet customers’ demands.
Macquarie, which has minority stakes in grain traders Lansing and Quadra Commodities, is unlikely to pursue a 100 per cent holding in Czarnikow.
“We are confident the new shareholding structure will support the future growth of Czarnikow,” said Robin Cave, Czarnikow chief executive.
The remainder of the company is held by Associated British Foods which owns 42.5 per cent, and an employee trust with 15 per cent.