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Sugar land price still $400 million too high, consultant says

Miami Herald – November 19, 2008

The state already has shaved $400 million off its bid for U.S. Sugar, but an independent financial advisor says another $400 million whack is necessary to reach a fair price for taxpayers.

A one-page summary of a ‘’fairness opinion,’’ produced by an investment banking consultant hired by water managers, undercuts the state’s $1.34 billion offer and two separate appraisals by nearly 30 percent.

But Robert Coker, a U.S. Sugar vice president, said the company had no intention of haggling. ‘’The number is set in stone,’’ he said.

The opinion, which the South Florida Water Management District posted online Tuesday, adds yet another big-dollar figure for the agency’s governing board to weigh when it meets to discuss the deal Dec. 2. Several members of the board, which must approve the blockbuster land purchase for Everglades restoration, have questioned the price tag.

The district issued an unattributed statement saying such opinions, usually done for corporate mergers, is only one of many assessments the board would consider.

‘’It is not an appraisal and does not provide a conclusion about the value of the acquisition relative to its public purpose,’’ the statement said.

Coker dismissed the opinion as ‘’irrelevant’’ because it was produced when the state was considering a $1.75 billion purchase of an ongoing business operation, not just 181,000 acres of company land. Two appraisers put the value of that land, enhanced by potential development of rock mines or suburbs, at $1.3 billion and $1.37 billion.

Duff & Phelps, a New York investment advisor, pegged a fair land price at $930 million. Based on the company’s recent earnings and projections, which Coker said included two of the company’s worst years, the opinion valued the company’s rail operations at $200 million to $240 million and its citrus business at $140 million to $160 million.

Under the proposed deal, U.S. Sugar could lease back and farm almost all the land it is selling, 181,000 acres, at $50 an acre per year, but the company would continue to own and operate its rail, sugar mill and citrus plant. The revised deal includes restrictions that would make almost all the land off-limits to the state for Everglades restoration projects for at seven years.

Kirk Fordham, chief executive officer of the Everglades Foundation, said environmentalists want the land but also ‘’the best possible deal for taxpayers.’’ The lease-back rates and duration have ‘’raised some eyebrows,’’ he said, ``but until we can take a look at the entire contract, I want to reserve judgment.’’

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