CBH seeks clarity on AGC bid

24/02/2016 - 15:36

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Grain handler CBH Group has called for more information on the $1 billion-plus offer from Graincorp-backed Australian Grains Champion to corporatise and list the cooperative, highlighting concerns around long term cost increases, the proportion of grower ownership and board representation.

CBH seeks clarity on AGC bid
CBH is the state's largest grain handler.

Grain handler CBH Group has called for more information on the $1 billion-plus offer from Graincorp-backed Australian Grains Champion to corporatise and list the cooperative, highlighting concerns around long term cost increases, the proportion of grower ownership and board representation.

Ahead of the CBH annual general meeting today, chairman Wally Newman said the cooperative needed more clarity around Grains Champion’s network, handling and growth plans.

See also: Graincorp in $1bn-plus CBH listing bid

Additional information was also sought on grower investment schemes and a farming future fund.

Grains Champion is currently pledging to cap storage, handling and transport charge increases at CPI for five years, but Mr Newman expressed concern that they might dramatically increase after that time.

A further consideration was that Graincorp could potentially hold a blocking stake, after being granted options and warrants in the proposed deal.

“We are clear about our obligation to growers and believe it’s fair and reasonable to request this information so that we can continue to assess whether this proposal is in the best interest of WA grain growers, in good faith and with an open mind,” Mr Newman said.

CBH is owned by more than 4,000 growers in a cooperative structure which has existed more than 80 years.

“Once we have received adequate information, we can continue our evaluation of what this proposal means for growers,” Mr Newman said.

“The composition of the board of directors of Grains Champion is not clear and there appears to be no mechanism by which WA grain growers are guaranteed representation at board level.

“There must be an indicative view of value and associated implications for CBH grower shareholders in terms of value of shareholding.

“We still don’t know what percentage of Grains Champion will be owned by CBH shareholders, GrainCorp, HRL Morrison and the Grains Champion founders.

“The proportion of grower ownership and the value for grower shares would remain an unknown until after the actual eventual listing of Grains Champion takes place, this is vital detail that we must have before we can continue with an assessment of the Grains Champion proposal.”

The proposal was revealed last week, with Grains Champion offering $600 million in upfront cash for growers with an additional $400 million available for pre-IPO share deals.

Business News understands this values CBH at about $3 billion.

Sydney-based GrainCorp will contribute up to $600 million to the deal, with half of that through notes and warrants that may be converted to equity, and a $300 million share option, while New Zealand fund Morrison & Co will contribute $300 million.

In January, CBH announced a reduced net profit for its 2015 financial year (which runs to October), down by more than 44 per cent to $82.7 million.

The cooperative’s largest division, trading, was in the red to the tune of $17 million, while storage and handling earned about $100 million.

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