February 1, 2011

CBH to modernise constitution, remain a cooperative

Cooperative Bulk Handling Ltd. (CBH) said Monday (Jan 31) it will remain a grower-owned and controlled cooperative, but with a modernised constitution, after a yearlong review of its ownership structure.

This "Enhanced CBH" model chosen from three potential cooperative options studied means CBH's structure continues to fall within the technical definition of a Non-Distributing Cooperative under state law, thus retaining its valuable tax-exempt status for its grain-storage and handling business, CBH Group Chairman Neil Wandel said.

The decision by the board effectively rules out any immediate possibility that CBH would be privatised and corporatised, thereby becoming a potential target for the foreign-owned multinational companies that increasingly dominate the Australian grain industry.

Some of CBH's grower members wanted the cooperative to demutualise and change its structure to that of a joint stock company-and possibly list on the stock exchange. They believed this would unlock their considerable equity in the A$1 billion company and form Australia's largest listed grain company.

CBH, the last major remaining cooperative of the many that formerly dominated Australian agriculture, operates nearly 200 upcountry grain storage sites and four coastal export terminals in Western Australia, holds a 50% stake in Interflour, one of the largest flour millers in Asia, and markets grain through its Grain Pool unit.

"Let me be absolutely clear-CBH is proud to remain a co-operative. Our co-operative model has seen us grow from strength to strength over more than 75 years, reflected in the fact that we are now Australia's largest co-operative," Wandel said.

CBH wants to enhance its operations to include partial refunding of charges to reward growers for their patronage of the storage and handling network, to invest more in the network as well as to develop and roll out new products, services and investment instruments that will provide more value to growers and the industry, he said.

Research and independent expert advice shows that cooperatives can be equally as successful and globally competitive as corporate models, provided they adapt to a changing environment and the different needs of their members, which is what CBH is doing, Wandel said.

"In the Australian context, there are a number of examples of grain storage, handling and marketing organisations formerly controlled by growers which have gone down the demutualisation and corporatisation path, only to lose their focus on growers and be taken over by multinational companies seeking to provide returns to external shareholders," he said.

The CBH board expects ask members to support a new and modernised constitution in a vote later in 2011, he said.