June 12, 2007

 

Australian wheat growers favour AWB demerger plan
 

 

Australia's newly-formed Wheat Export Marketing Alliance favours a demerged international unit of AWB Ltd. to manage the operations of a single desk for exports, Geoff Nalder, a member of the alliance and president of the grains group Victorian Farmers Federation, or VFF, said Tuesday.

 

However, in light of the possibility that AWB shareholders do not approve the demerger proposal, the alliance has also begun what could be a long process to form a new company to manage exports, he said.

 

The alliance represents five state-based wheat grower lobbies that met over two days last week in Melbourne to begin the complex task of deciding on future arrangements for export marketing of their product, which can be valued at up to A$5 billion (US$4.212 billion) a year.

 

"The alliance is supportive of the process that AWB is embarking upon," Nalder said by telephone from his farm near Swan Hill, northern Victoria state.

 

Representatives of AWB and adviser Deutsche Bank told the meeting about the constitutional processes needed for shareholders to approve the demerger, which Nalder said would be difficult, and the lengthy time frame to get to a vote, which he said is of concern.

 

Peter McBride, a spokesman for AWB, said the company still has a "fair bit of work" to do on the demerger proposal, with Deutsche Bank to provide more information to AWB about the plan at a scheduled meeting of the board late in June.

 

This information could include a value proposition needed for AWB shareholders to approve the demerger, he said.

 

Prime Minister John Howard told growers in late May to come up with a new entity to manage the wheat export single desk, which could be a completely new entity or a completely separated and demerged international unit of AWB.

 

If growers cannot agree on a new entity by March 1, the government will propose other arrangements, which would include further deregulation, he said.

 

In legislation expected to be introduced to parliament Thursday, the government will extend existing wheat marketing arrangements for exports, which include veto power held by the agriculture minister, up to Jul 1, 2008. Under the earlier system, AWB held the power to veto export proposals by other entities.

 

Nalder said plans for a new entity should be moving along in the event that the demerger proposal fails, as a shareholder vote on it would not happen before October.

 

The alliance plans to meet again Jul 2-3 after AWB directors meet, he said.

 

The alliance could be looking at substantial costs to establish a new entity to operate the single desk and it is "open to suggestions as to where we can find some money to continue the process."

 

Meanwhile, the group is in discussions with merchant and commercial bankers on what they consider an appropriate way forward for a new entity and whether any money is available, he added.