Rogers Sugar Income Fund to Acquire Lantic Sugar; Kraft Foods to Move Michigan Candy Plant to Montreal

On January 8, Rogers Sugar Income Fund announced a proposed transaction to acquire Lantic Sugar Limited of Montreal, Quebec. This follows a definitive agreement with Onex Corporation and Belkorp Industries Inc. to exchange 35.5 million units of the Fund for all the outstanding common shares of Lantic Sugar Limited. Following the anticipated approval by the Fund's unitholders and regulatory approval, the transaction will create common ownership of the two companies, Rogers Sugar and Lantic Sugar with combined sales of approximately 650,000 tonnes, annual revenues of approximately $450 million and a market capitalization of more than $300 million. The Trustees of the Fund have unanimously agreed to recommend the transaction to members, which is expected to close in March 2002.

It was reported that Rogers Sugar will benefit from improved geographic and customer diversification, Lantic's recently completed $120 million modernization and the enhanced capital spending flexibility of common ownership of the two companies. As a condition of the deal, the Fund will raise a minimum of $50 million by issuing additional units or convertible debentures, of which Onex and the other Lantic shareholders will purchase 10 percent. Proceeds of the financing will be used to repay senior debit of both Lantic and Rogers. Also, units received in the exchange deal by the selling shareholders will not be marketable for one year.

Rogers Sugar is the leading sugar refiner in western Canada and has been in the sugar business since 1890. The Company has a cane sugar refinery in Vancouver and a sugar beet processing plant in Taber, Alberta. Lantic Sugar operates a world-scale refinery in eastern Canada and over 75% of the company's sales are to industrial users including confectioners, bakeries and dairies.

Kraft Foods to Move Michigan Candy Plant to Montreal

Kraft Foods has re-affirmed plans announced in early January that it will close the 35-year-old Life Savers plant in Holland, Michigan. Production will be transferred to Kraft's Mount Royal, Quebec plant near Montreal in 2003.

Kraft officials have stated that the move will result in lower operating expenses and raw material costs, including the cost of sugar. The Associated Press reported on January 8 that Chamber of Commerce President Chris Byrnes said the Holland plant was hurt by the high cost of sugar in the United States, which, unlike Canada, imposes a high duty on sugar and restricts its imports. By moving Life Savers to Canada, Kraft will save about 10 cents for every pound of sugar, Byrnes said. "When you're buying sugar by the tens of millions (of pounds), that adds up," he said.

The Holland Michigan plant apparently has been underutilized since the divestiture of breath mints and gum when Kraft integrated Nabisco in 2000. The plant is the only US facility producing traditional Life Savers and Kraft is not prepared to invest or add production of other product lines. According to a January 22 report in the Montreal Gazette, the Mount Royal plant has the space to absorb Holland's production. Production at Mount Royal will benefit from lower manufacturing costs, making the best use of manufacturing assets and providing long-term efficiencies.

The Mount Royal plant is Kraft's largest in Canada producing more than 600 skus. Apparently the company is negotiating with the province of Quebec that may provide certain incentives to add jobs to the local operation. The Michigan Economic Development Corp. reportedly offered Kraft a package of incentives valued at about US$ 25.5 million to stay in Michigan but Kraft said it plans to proceed with the move based on the above factors over which the state has no control.

Kraft acquired the Canadian rights for the Life Savers brand from Beta Brands Ltd. in late December 2001. As a result, Kraft now owns the rights to Life Savers throughout North America. In the transition, Beta Brands will continue to supply Kraft with Life Savers under a co-pack agreement.