Shareholders in Tully will most likely be offered a mixture of cash and scrip for their holdings in the unlisted public company instead of simply offering them Maryborough scrip alone, BusinessDay has learned.

The companies are working on a valuation for Tully of about $110 million.

Maryborough Sugar announced last month it had set up a working party to assess the benefits of a merger.

Talks between the sugar producers are being fuelled by 1980s corporate raider Sir Ron Brierley and his Guinness Peat Group investment vehicle, which is a major shareholder in Maryborough Sugar.

It is part of a strategic plan by Sir Ron to consolidate the $2 billion sugarcane industry by mopping up the many grower co-operatives that have controlled the industry historically.

A tie-up between the ASX-listed Maryborough Sugar and Tully, which is the largest sugar crusher in northern Queensland, will also hand GPG a larger stake in Sugar Terminals and accelerate its place up the share register.

Sugar Terminals owns seven bulk sugar terminals along the coast of Queensland.

Maryborough recently raised its holding in Sugar Terminals to 12.8pc from 9.99pc following the recent acquisition of rival sugar producer Mulgrave Central Mill and the purchase of a parcel of shares from Guinness Peat.

If it takes over the unlisted Tully, it will get its hands on a further 3-4pc of Sugar Terminals stock.

This could further anger an already riled Sugar Terminals board.

Last year Sir Ron and Maryborough Sugar successfully fought off an attempt by Sugar Terminals to limit their voting rights.

The merger working party — comprised of the chairmen, chief executives and chief financial officers of the respective companies — is still grappling with how to value Tully.

Tully has about 500 shareholders, mostly growers, and recorded a profit last financial year of $7.8 million. Maryborough Sugar posted a net loss of $4.73 million, down from a profit of $1.45 million in 2007.