CSR Ltd &lt;CSRA.S> has made a bold move inselling its oil and gas interests for almost a billion dlrs and
ploughing 150 mln into its traditional sugar business, share
analysts said.
    "It sounds like a good deal," Stuart McKibbin of &lt;A.C. Goode
and Co> told Reuters.
    CSR said it had dropped plans to float its oil and gas
interests held in the &lt;Delhi Australia Fund> and would instead
sell it to Exxon Corp &lt;XON> unit &lt;Esso Exploration and
Production Australia Inc> for 985 mln dlrs.
    In a twin announcement CSR, already Australia's largest
sugar refiner, made a 2.20 dlr a share bid for the 70 pct it
does not already hold in &lt;Pioneer Sugar Mills Ltd>.
    "This will be a big shock to the market, which was under the
impression that CSR was well down the road to floating Delhi,"
McKibbin said.
    A float of part of Delhi would have raised between 200 and
300 mln dlrs, but in opting to sell outright, CSR had given
itself the cash to practically eliminate its debt and embark on
an ambitious expansion programme in its best-performing
divisions of sugar and building products, analysts said.
    CSR not only gets the 985 mln dlrs but also has the right
to share equally with Esso any higher returns resulting from an
oil price over 20 U.S. Dlrs a barrel in the next two years.
    Delhi is one of Australia's largest onshore oil producers
yielding about six mln barrels a year from the Cooper Basin.
Analysts said the deal could net CSR as much as three mln dlrs
for every dollar rise in the oil price above 20 dlrs.
    Neale Goldston-Morris of Sydney broker &lt;Bain and Co Ltd>
said the move out of Delhi and investment in the sugar industry
was a sensible one but added that it represented the loss of
Australian-owned assets to a foreign company.
    "The farm they bought back a few years ago is being sold
back to the Americans," Goldston-Morris said.
    The Pioneer Sugar investment would make CSR by far the
largest player in Australia's 850 mln dlr a year sugar industry
and would give it access to some of the best sugar properties
and mills in the country, analysts said.
    They said Pioneer Sugar was expected to recommend
acceptance of the bid through which CSR would benefit from the
bottom out of a cyclical downturn in sugar prices.
    Sugar prices are forecast to rise to 340 dlrs a tonne next
season from an estimated 270 dlrs this year, they said.
    Selling Delhi meant CSR has finally quit a damaging
investment, made in 1981, which has dragged down the company's
overall performance, analysts said.
    CSR last year wrote off more than 550 mln dlrs in losses on
what had been a 591 mln U.S. Dlr investment financed entirely
from U.S. Dollar debt, they said.
    "It was a bad investment for them. They financed it entirely
with debt, the currency collapsed on them and then the oil
price collapsed on them," Owen Evans of Sydney broker &lt;Meares
and Philips Ltd> said.
    Esso not only picked up Delhi's oil and gas output but also
gained as much as 300 mln dlrs in transferable tax losses
accumulated in exploration allowances and other concessions.
    Analysts said Esso also gained its first real onshore stake
in Australia in its first major diversification from the 50/50
Bass Strait partnership with The Broken Hill Pty Co Ltd
&lt;BRKN.S>.
    "Esso has been very keen to diversify from the Gippsland
Basin. They haven't found too much oil in Bass Strait lately
and Esso needed a large pool of ongoing production,"
Goldston-Morris said.
 REUTER
