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Trial over sugar industry merger set to begin. What's at stake?

United States Sugar Corp., a Florida company that markets sugar cooperatively with Red River Valley sugarbeet growers through United Sugars, is seeking to purchase Imperial Sugar Co. The U.S. Department of Justice is suing to block the purchase.

032421.AG.USSugarCorpBuysImperial01.jpg
U.S. Sugar Corp., a partner in Minnesota-based United Sugars Corp., announced March 24, 2021, that it will purchase the Imperial Sugar Co., including its big port refinery near Savannah, Georgia, shown above.
Courtesy / United Sugars Inc.
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WILMINGTON, Delaware — A dispute over whether one sugar company should be allowed to buy another is set to start Monday, April 18, in Delaware. While the main players are on the East Coast, it is of interest to sugarbeet growers nationwide and in particular in the Red River Valley of Minnesota and North Dakota.

Here is what you need to know:

The plaintiff: The case was brought in fall of 2021 by the U.S. Department of Justice, which is suing to stop consolidation within the sugar industry .

The defendants: United States Sugar Corp., United Sugars Corp., Imperial Sugar Co., and Louis Dreyfus Co.
U.S. Sugar wants to buy Imperial Sugar, both sugar cane companies. U.S. Sugar is already part of a sugar marketing partnership called United Sugars. Louis Dreyfus is an international business that is parent company of Imperial Sugar.

Why does it matter to the Red River Valley? United Sugars is why. American Crystal Sugar, based in Moorhead, Minnesota, and Minn-Dak Farmers Co-op, based in Wahpeton, North Dakota, also are part of United Sugars. Both American Crystal and Minn-Dak are owned by sugarbeet growers in the Red River Valley. Wyoming Sugar also is part of United Sugars.

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Why the feds are suing: The federal government tries to prevent monopolies within an industry to ensure fair competition and prevent price gouging that will hurt consumers.

U.S. Sugar is based in Florida, where it owns a large refinery. Imperial Sugar owns a refinery in neighboring Georgia, near the port city of Savannah. The Justice Department says allowing the merger of two major sugar marketers, both in the Southeast, will be bad for consumers in that region.

Also, the four partner companies in United Sugars already account for 43% of the sugar market and the Justice Department lawsuit noted the "cozy" relationships among sugar companies.

The defense: U.S. Sugar says that by buying Imperial, it can upgrade Imperial's facilities, making it more efficient and able to produce sugar at a lower cost. It also says by owning two refineries, it can keep one operating even if the other one has to shut down (for a hurricane, for instance), ensuring a steady flow of sugar to consumers.

It also says there is plenty of competition from other sugar sellers, that the feds don't understand the sugar market and that the U.S. Department of Agriculture is positioned to ensure fair prices in the sugar industry.
More arguments in favor of the deal may come out at trial.

Why is the trial in Delaware? The lawsuit was filed in Delaware, because U.S. Sugar, even though it has its headquarters and a refinery in Florida, is incorporated in Delaware and Louis Dreyfus, a Dutch company that is the parent company of Imperial Sugar, is incorporated in the U.S. in Delaware. Many companies incorporate in Delaware because of favorable tax laws in the state. The defendants asked for a trial in the Southeast, but Judge Maryellen Noreika kept it in Delaware.

Is there a jury? No, this will be a bench trial with Judge Noreika making the ruling. The judge also is limiting each side to 14 hours to make its opening and closing arguments, questioning of witnesses and arguments about evidence.

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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