Little more than three months after ending merger talks, Maryborough Sugar Factory, Australia's only listed pure sugar company, has been moving towards an off-market takeover offer for unlisted miller Tully Sugar, a major competitor.  

The sugar company announced last week it intended to make a $90.4 million offer to buy all shares of Tully. If the offer is successful, Maryborough will issue 40.2 million new shares with Tully shareholders collectively owning 46 per cent share of the merged company, it said. 

Mallesons Stephen Jaques partner John Humphrey, whose M&A team advised Maryborough on the takeover, said the deal signals an impending shift in the rationalisation of the sugar industry. 

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Humphrey predicts a wave of deals as the level of government assistance to the sugar industry has dropped off.

Historically, and specifically over the past 100 years, the sugar industry has seen sugar growers get together and form these milling companies as cooperatives, said Humphrey. 

But a drop in assistance from government has reduced, he said, "which has meant sugar farmers have been at the mercy of commodity prices, which have fluctuated". 

"This has meant the sugar industry has gone through hard times, and there have been a fairly significant rationalisations going on. It has resulted in a lot of mills closing," the Mallesons partner said. 

The various cooperatives have converted to limited liabilities, said Humphreys, but they have been unlisted. "Now what is happening there are some people looking to achieve some aggregation in the industry. This is interesting because this merger, if it goes ahead, will be the first pure sugar company that is listed," he said. 

CSR, which is listed on the ASX, has other operations, said Humphreys. But CSR is now looking to demerger its sugar operations from its other businesses. 

"If that demerger goes ahead there will be another pure sugar player," he said. 

Mallesons advised Maryborough on the structuring and planning of the takeover, as well as the various requirements under the Corporations Act and ASX listing rules. 

The Mallesons team, which also included senior associate Michael Angelini and senior lawyer Rhys Casey, also coordinated the due diligence and verification process and advised on the legal issues arising throughout the takeover and compulsory acquisition process.