February 17, 2016
GrainCorp joins Australian Grains Champion consortium
GrainCorp has announced that it will join a consortium led by Australian Grains Champion (AGC).
H.R.L. Morrison & Co will act on behalf of the consortium which consists of underlying Australian superannuation investors.
Australian Grains Champion is a Western Australian grower-led initiative which had invited GrainCorp to support its proposal as a cornerstone investor.
It is proposing the commercialisation and potential listing of Co-operative Bulk Handling Ltd (CBH). Australian Grains Champion is presenting the proposal to the Board of CBH with a request that it will be made a part of CBH's grower members.
The proposal provides a unique opportunity for GrainCorp to invest in CBH through its investment in Australian Grains Champion. It will also develop a pathway for GrainCorp to obtain a future equity interest in a publicly listed Australian Grains Champion as holding company of CBH. This investment creates substantial potential to enhance the alignment and strategic relationship between GrainCorp and CBH.
The proposal will entail Australian Grains Champion acquiring 100% of shares in CBH, subsequent to a successful CBH grower member vote, in exchange for:
- shares in Australian Grains Champion, such that CBH grower members and existing AGC shareholders would own 100% of AGC's shares before any initial public offering
- a US$600 million cash payment to grower members of CBH, paid upon satisfaction of the proposal's conditions
- a commitment to progress a listing of CBH.
GrainCorp will also be entitled to appoint a director to the AGC Board. The company anticipates that fulfilling proposal conditions, including obtaining the approval of CBH grower members, is likely to take at least six to 12 months.
"We see enormous strategic merit in the Australian Grains Champion proposal. Our willingness to support it is based on a view that the investment presents a compelling opportunity for Western Australian growers, while also delivering opportunity for CBH, GrainCorp shareholders and Australian agriculture more broadly," Mark Palmquist, CEO and managing director of Graincorp, said. "Importantly, the decision to proceed is ultimately one for Western Australian growers and we respect that process."
"Our proposed investment is a good strategic fit for GrainCorp, bearing in mind CBH's complementary assets and capabilities. CBH is an excellent business with a strong position in Australian agriculture,"Palmquist added. "GrainCorp is also a significant Australian agribusiness and, if we can support the growth of Australian agriculture, then we feel a responsibility to participate. We believe we offer significant value to CBH through our experience as a listed agribusiness, our complementary operations and grain processing capabilities."
Furthermore, Palmquist believes that Graincorp's involvement in the proposal potentially avails the corporation an opportunity to contribute to CBH's development in a "meaningful way in the future".