JOHANNESBURG (Reuters) - South Africa's Illovo Sugar (J:ILVJ) said on Monday it has received a non-binding expression of interest from its largest shareholder Associated British Foods (L:ABF) in buying the rest of the company.
AB Foods, which holds a 51.35 percent stake in Illovo, intends to make an offer of 20 rand (0.8593 pounds) per share for the stake it does not yet hold, Africa's top sugar producer said in a statement, in a deal worth around 4.1 billion rand (176.16 million pounds).
Illovo's shares were up 9.42 percent at 20.10 rand by 1429 GMT, hitting a 10-month high, while ABF's shares were down 1.16 percent at 3,061 pence.
Illovo, which has been cutting costs to survive low sugar prices, said ABF plans to make a cash offer to all other shareholders but there was no certainty of a deal.
"Illovo certainly faces challenges, no doubt about that, but these are not new challenges," said ABF's finance director John Bason, referring to the drought sweeping across southern Africa. "We take a long term view."
Shares in the South African company have been depressed by the effects of the severe drought in its home market, Standard Bank Group Securities analyst Sumil Seeraj told Reuters.
"It is opportune for ABF to make the offer now and I think it is a bit low," said Seeraj.
Seeraj expects some of the sugar producer's other large shareholders would demand a higher premium as South Africa's weaker rand could boost Illovo's earnings this year.