GrainCorp in push to privatise CBH

GrainCorp will back the proposed transition of co-operative grain handling business CBH to a commercial structure, and a subsequent listing on the ASX.

In a move proposed last week by Australian Grains Champion (AGC), CBH members could garner up to $1bn in cash, and valuable, tradeable shares through a float process.

“This is a considerable amount of money and its injection into the Western Australian grains industry will have significant positive effects for grain growers, regional communities and the State economy,” AGC grower director Clancy Michael said.

Under the AGC proposal, CBH shareholders would exchange their shares in CBH for a cash payment of $600 million and shares in AGC.

Australian Grains Champion would then list on the ASX, with the timing of that move subject to regulatory approvals and market conditions.

Growers will be able to sell their shares into a pre-IPO share sale facility, increasing the cash component by up to $400 million if they take this route.

“It is a once-in-a-lifetime opportunity for farming families, because investment of this scale is difficult to attract,” Michael continued.

“Now is the time to protect CBH’s future, deliver an affordable network reshape strategy, equip CBH to be more competitive and unlock the equity growers have built in CBH.

“Australian Grains Champion has a Five Year Growth Plan for the business and is developing an affordable Network Reshape Plan to deliver grain into premium price markets.”

On the same day AGC proposed its plan to the WA-centric co-operative, east-coast grain exporter GrainCorp announced it would join the AGC consortium, after AGC approached it with its proposal.

“We see enormous strategic merit in the Australian Grains Champion proposal,” GrainCorp chief executive Mark Palmquist said.

“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.

“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.

“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.

“Our participation in this proposal potentially gives us an opportunity to contribute to CBH’s growth and success in a meaningful way in the future.”

The CBH Group countered the AGC proposal two days later, on February 19, saying in its 2016 Grower Value Statements this week that co-op members’ storage and handling fees remain advantageous “compared to equivalent services on the east coast”.

CBH boss Dr Andy Crane said WA growers are roughly $14.50 per tonne better off using the co-op’s storage and handling facilities and services, compared to their counterparts in the rest of Australia.

“The total storage and handling savings for 2015/16 reach $195 million when benchmarked against the rates of all major storage and handling providers in Australia,” Dr Crane said.

“When comparing transport costs, WA growers using the CBH network pay a total of $85 million less than their counterparts in eastern Australia.

“In addition to these savings CBH also provides a rebate to growers, which is deducted from their storage and handling fees.”

CBH will discuss the proposal at its Annual General Meeting on Wednesday, February 24.