GrainCorp Seeks Slice of Biggest Crop Handler in Australia

  • Proposal needs support from 75 percent of CBH grower owners
  • CBH controls 90 percent of grain handled in Western Australia

GrainCorp Ltd. swung its support behind a group of growers seeking an initial public offering of the biggest crop handler in Australia with a planned A$300 million ($213 million) investment in a vehicle to help fund the buyout.

The proposal will ensure the Sydney-based GrainCorp gets an equity stake in Co-operative Bulk Handling Ltd., known as CBH, should the farmer-controlled crop handler agree to the IPO plans being put forward by Australian Grains Champion.

Australian Grain Champion, backed by former CBH director Samantha Tough, is seeking to convince CBH to hold a vote on an IPO to open up investment in the cooperative that handles about 90 percent of the grain grown in Western Australia, the source of most of Australia’s wheat exports. Any vote would need the backing of 75 percent of CBH’s 4,200 farmer owners - who have resisted previous IPO attempts.

“A positive vote would be beneficial to all organizations; CBH, GrainCorp, our shareholders and Australian agriculture in general,” GrainCorp Chief Executive Officer Mark Palmquist told reporters on a conference call on Wednesday. “We understand that 75 percent approval is a big hurdle.”

Takeover Attempt

GrainCorp’s largest shareholder remains Archer-Daniels-Midland Co. A takeover attempt by ADM was blocked last year. GrainCorp slipped 1.2 percent in Sydney to close at A$8.52, taking its decline for the year to 1.3 percent.

CBH met with Australian Grains Champion on Wednesday and said in an e-mail that it would take several weeks to assess the proposal. It is being advised by Deutsche Bank AG. GrainCorp is being advised by Macquarie Bank Ltd.’s Macquarie Capital.

Under the proposal, GrainCorp, the biggest crop handler in eastern Australia, would buy A$300 million in AGC Notes alongside an A$300 million investment from HRL Morrison & Co. and other investors. 

GrainCorp hasn’t discussed the investment with either ADM or CBH, Palmquist said on the call. The investment will help fund an initial cash payment to the farmer owners of CBH should they agree to the proposal. It would also give GrainCorp the right to buy additional shares in CBH. GrainCorp has “no intention” of raising equity to fund its potential investment in the AGC Notes, the company said in a statement.

CBH has total assets worth more than A$2 billion, according to its website, with its storage and handling facilities controlling about 90 percent of the grain grown in Western Australia.

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