Sugar, Sugar

Credit to Florida newspapers for stellar reporting on U.S. Sugar deal

A Credit to the Florida press for its reporting on the state’s agreement to buy nearly three hundred square miles of the Everglades from U.S. Sugar.

We first read about the plan in The New York Times and The Wall Street Journal. Despite our initial excitement about such a major conservation project, those pieces left us scratching our heads on several points.

Why would U.S. Sugar suddenly sell out and close shop? Why would the state pay more for the company than it seems to be worth? How much of the land will really be used for conservation, which is the stated purpose of the deal?

To follow these and other loose ends left by the two New York papers, we took a digital trip down to Florida for a look at local and regional coverage, and we came away knowing a lot more.

The St. Petersburg Times shed some light on why U.S. Sugar sold out, noting a 2006 federal court ruling that said one of its practices violated the Clean Water Act. Several months later, a state agency ended the practice. This hit U.S. Sugar hard, and, in the time-honored corporate response to regulation, the company’s lobbyists appealed to Crist:

‘I knew what they wanted and that our administration wasn’t excited about embracing any more,’ Crist said. So he figured that ‘maybe it was time to take a quantum leap forward.’

Crist said that when he first proposed buying everything U.S. Sugar owns, ‘originally there was some surprise’ among even his staff. ‘But the more people thought about it, they thought, why not?’

The South Florida Sun-Sentinel fills in more gaps by providing the point of view of Robert Coker, senior vice president of U.S. Sugar:

Coker said U.S. Sugar went to Gov. Charlie Crist with its list of usual concerns—higher farming costs, infrastructure, transportation, Lake Okeechobee and the federal lawsuit pending against it [click here for more on that]—and about seven months ago the governor brought up the idea of selling the whole company to the South Florida Water Management District.

So the environmental lawsuit wasn’t the only factor in U.S. Sugar’s taking the deal. That makes sense. The sale would have been a drastic response to one environmental ruling.

This raft of issues leads us to wonder how much U.S. Sugar is worth. Florida offered $1.75 billion, which comes to about $350 a share. That’s well above two previous offers of $293 a share that the company turned down, and much higher than the $180 to $204 its shares have traded for privately in recent times, reports the St. Pete Times, which also notes the company will get to operate for six years—and presumably earn money—before winding down operations.

Florida is acquiring everything from the business, even though all it really wants is the land. The St. Petersburg Times reports this quote:

‘They’re acquiring us lock, stock and barrel,’ said U.S. Sugar’s public relations director, Judy Sanchez. ‘It’s soup to nuts. That’s the only way we’d do the deal.’

That makes it sound like U.S. Sugar had the upper hand, or at least a pretty strong bargaining position. But that raises the question of CEO Robert Buker’s defense of the deal in The New York Times, in which

he said that the company had no choice but to sell because the state had the upper hand, and could have pushed them off the land with laws, rather than with $1.7 billion dollars.

So the state’s fine price is just charity and it’s buying an entire sugar operation, rather than just the land, for no reason at all? This makes no sense, and the NYT doesn’t question the assertion.

Not that the Florida pieces are perfect. They don’t always follow through on thoughts, but they do provide plenty of information and let readers draw their own conclusions.

For instance, trying to calculate the worth of U.S. Sugar—not an easy task—the St. Pete Times finds a government appraiser who thinks the price overvalues the land by more than double, but also quotes a conservation official who thinks the price may be a “bargain.” And so the piece ends with no real conclusion. But we’ll offer one.

The fact is, these are two different ways of measuring value. Zech, the appraiser, is looking at it from a market standpoint. Danter, the conservationist, is looking at the deal as a piece in the state’s conservation plans. Both of these are legitimate measures of value.

But what if the government weren’t the purchaser? What if the purchaser were a private company? A corporation would never pay such a high price, so why should the government?

This brings us back to one of the Sun-Sentinel stories, which notes that U.S. Sugar has not always been consistent about the worth of its business, recently touting sugar prices and its business as strong.

Yet, previously, U.S. Sugar Corp. executives have said they’re worried about the long-term future of the sugar-cane industry in the United States. While Congress continues to protect the industry by limiting imports and propping up prices for domestic sugar, cane production faces growing regulatory and environmental hurdles.

And moves toward more open trade have boosted pressure to increase sugar imports…

That’s a good catch. In short, U.S. Sugar complained about hard times when it needed help, but boasted about strength when the appraisers started snooping around. Given the state of the American sugar industry, we’re more inclined to believe the first characterization.

So what is the high price really for? Conservation, yes, but what does that mean? Even the Florida press has tended to be a bit vague on this one, a bit too willing to buy into the vision of lolling crocodiles amid rows of Mangrove trees. But here’s the St. Petersburg Times:

But more than 100,000 acres of it could be turned back to farming—perhaps growing crops for use as fuel, said Department of Environmental Protection Secretary Mike Sole.

‘I don’t need 187,000 acres for environmental restoration,’ said Sole—an assertion that was already stirring opposition among environmental activists who have long wanted to restore the broad expanse of the River of Grass.

So the government is buying this land at a very high price in large part to cultivate biofuel crops. That’s hardly the conservation touted by the Journal and NYT.

This deal was reached in almost complete secrecy, as The Miami Herald and others pointed out. As details solidify, journalists and other observers need to stay sharp on this deal and not let Eden-like promises cloud their vision.

After all, politics are never far from view. The local press prominently reported that this environmentally conscious deal comes just after Crist’s abandoning of his objection to offshore drilling. At the same time, Crist’s name is floating around as McCain’s potential vice-presidential running mate.

We trust the Florida press to stay on the case.

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Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.