PAA Research Comments on Imperial Sugar, Which Chose not to Exercise its Option to Acquire Wholesome Sweeteners

On Friday, May 26th after the close, Imperial Sugar Co.

announced that it would “not exercise its option to acquire the remaining ownership stake in Wholesome Sweeteners from Edward Billington and Son Ltd, a UK based food and agriculture, privately held manufacturing and trading company,” PAA Research reports. “Admittedly, IPSU's decision to decline its purchase option of Wholesome Sweeteners came as a real surprise to us,” PAA Research writes. “For the past 6-9 months we had identified the potential acquisition of the remaining ownership stake in Wholesome Sweeteners as a potential positive catalyst for IPSU shares. “Initially, our reaction to IPSU's decision to allow its purchase option to expire was one of disappointment. However, the more we think about it, the more we recognize that it could be best for shareholders in the long run. First, to get this out of the way, our forecasts do not include a 100% owned Wholesome Sweeteners. “The company will continue to participate in Wholesome's growth as a 50% owner. Second, our accretion/(dilution) analysis was based on several assumptions on our part, which may or may not be correct. The company has never provided detail on the purchase price multiple required to exercise its option.” “Finally,” PAA Research adds, “in our view IPSU's decision to let its option expire seems to imply that the management team and board think that the company's share price will be materially higher in the near future.” Imperial Sugar closed today at $17.80.