Associated British Foods plc announces a recommended offer to acquire 51% of Illovo, Africa's largest sugar producer

19 May 2006

Associated British Foods plc (“ABF”), the international food, ingredients and retail group, has today announced a recommended offer to acquire 51% of the fully diluted ordinary share capital of Illovo Sugar Limited (“Illovo”) for a cash consideration of £317m (R3.8bn) to be paid from existing resources and banking facilities on completion (“the recommended offer”). This offer is subject to regulatory approvals, Illovo shareholder approval and Court sanction of the scheme of arrangement.

Illovo is listed on the JSE Limited (“JSE”). In the year ended 31 March 2006 its revenue was £458m (R5.5bn), it generated a profit before taxation and material items of £54m (R651m) and headline earnings of £29m (R352m). At 31 March 2006 it had gross assets of £333m (R4.0bn).

The company is the largest cane sugar producer in Africa and one of the world’s lowest cost producers. It is the leading producer in South Africa, Malawi, Zambia and Swaziland and has a strong and growing presence in Tanzania and Mozambique. It produced 1.9 million tonnes of sugar in 2005/6 and has identified development programmes to expand this capacity substantially.

British Sugar is a substantial and core business within ABF. It has sugar operations in the UK, Poland and China, processing around 2 million tonnes of sugar annually, and is the lowest cost beet sugar processor in the EU.

ABF will support Illovo’s stated plans for capacity expansion and development in its African markets. It is expected that Illovo will benefit from the application of British Sugar’s proven expertise in improvement in operational efficiencies, co-product development, marketing and product innovation. In turn, British Sugar’s Chinese cane sugar operations will benefit from Illovo’s agricultural expertise.

The changes to the EU sugar regime will provide free access for exports to the EU from Least Developed Countries (“LDCs”) from 2009. The LDC classification includes Malawi, Zambia, Tanzania and Mozambique. British Sugar will provide an efficient route to market for these exports from Illovo.

In the first full year after acquisition the operating profit return is expected to meet the ABF cost of capital, and will be earnings enhancing.

George Weston, Chief Executive of ABF, said,

“The combination of British Sugar and Illovo will create a powerful partnership in Africa and Europe. Illovo has strong positions in its African markets, an excellent management team and the opportunity to benefit from free access for exports from its LDC operations to the EU from 2009. There is considerable scope to develop Illovo through British Sugar’s market and technical expertise.”

Don MacLeod, Managing Director of Illovo, said,

“Illovo and British Sugar are long term players in the sugar industry with significant complementary strengths, and are recognised for their efficiency as sugar producers. Illovo will benefit from British Sugar’s knowledge of the European market particularly once its operations in LDC countries receive unrestricted access into the EU from 2009. It is anticipated that there is good scope for technology transfer between the two parties.”

Deal Structure

The recommended offer carries the unanimous recommendation of the Illovo Board and the full support of the Illovo management team. ABF has received conditional undertakings to support this offer from the principal shareholders, either directly or through recommendations to their clients, accounting for 64% of Illovo’s ordinary shares in aggregate. The directors of Illovo have said that they intend to vote their own shares in favour of the offer. The conditions of the recommended offer include obtaining regulatory approvals, Illovo shareholder approval and Court sanction of the scheme of arrangement.

The principal features are:

• Offer for 51% of the fully diluted ordinary share capital;
• Illovo shareholders will receive a consideration of R21 per share in cash;
• Illovo will remain listed on the JSE and will retain its South African identity;
• The acquisition of shares is to be effected by way of a scheme of arrangement governed under South African law;
• ABF will have appropriate Illovo Board representation;
• Existing management team will continue and Don MacLeod will be asked to join the Executive Committee of British Sugar; and
• The transaction is expected to be earnings enhancing for ABF from the outset.

For further information please contact:

Associated British Foods:

Until 1200 only
George Weston, Chief Executive
John Bason, Finance Director
Tel: 020 7638 9571

Geoff Lancaster, Head of External Affairs
Mobile: 07860 562 659

Jonathan Clare/Chris Barrie/Sara Batchelor, Citigate Dewe Rogerson
Tel: 020 7638 9571

After 1500
John Bason, Finance Director
Tel: 020 7399 6500

A presentation for analysts will take place at 0900 hrs (London time) at the offices of ABN Amro,
250 Bishopsgate, London EC2M 4AA.

A webcast of the conference call will be available on the company website, www.abf.co.uk. The presentation will also be audible on +44 20 7162 0025 with a telephone replay facility available for 7 days following the event on +44 20 7031 4064, PIN number 706171.