SYDNEY, AUSTRALIA — GraincCorp is planning to demerge its global malting business, MaltCo, enabling GrainCorp’s Grains and Oils businesses to be combined into New GrainCorp.
“Our portfolio review made clear that these businesses have different characteristics and would benefit from operating separately,” said Mark Palmquist, chief executive officer of GrainCorp. “A demerger would provide both MaltCo and New GrainCorp with increased flexibility to implement independent operating strategies and capital structures and allow them to attract investors with different investment priorities.”
The demerger would result in two independent ASX-listed companies:
- New GrainCorp, a domestic and international grain handling, storage, trading and processing business focused on grains, oilseeds, pulses, edible oils and feeds.
- MaltCo, a global malting and craft brewing distribution business.
Following the proposed demerger New GrainCorp will be a global agribusiness with grain handling storage, trading and processing operations in Australia, New Zealand, North America, Asia, Europe and Ukraine. It will focus on building and developing its global grain and oilseeds origination network by continued investment in the GrainsConnect Canada supply chain and expanding into new markets in the Black Sea and Indian subcontinent. New GrainCorp also will include storage and logistics infrastructure assets with 145 country receival sites, with 20 million tonnes of storage capacity and seven bulk grain export terminals.
The company anticipates New GrainCorp to benefit from a range of initiatives from the Grains Business Unit, including:
- Operational improvements in grain stocks management;
- Grains cost reduction initiatives;
- New rail contracts
- ECA supply chain integration/improved asset utilization
- Expanded footprint in Canada, Ukraine and India expanding organics.
“As a result of the significant historic capital investment in the east coast grain storage and logistics infrastructure assets as well as the processing assets on the oils business, New GrainCorp’s future stay-in-business capital expenditure is expected to be approximately A$35 million to A$45 million per annum in a normal season,” the co-op said.
According to GrainCorp, MaltCo will become the world’s fourth largest independent maltster with malting houses in the United States, Canada, Australia and the U.K. MaltCo operates Country Malt group, a craft malt distribution business in North America once the demerger is complete.
“MaltCo will focus on developing its international portfolio, including by building on the growth of the recently expanded 220,000-tonne Potacello malting plant in Idaho, U.S., and the current 79,000-tonne expansion of capacity in Inverness and Arbroath, Scotland,” GrainCorp said.
The demerger is expected to be implemented by the end of 2019 and is subject to shareholder, final board, court and regulatory approval.
Contingent on demerger implementation, Palmquist will become managing director and CEO of MaltCo but will remain CEO of GrainCorp until demerger completion. He will resign from his managing director role and step down from the GrainCorp board. Klaus Pamminger, currently group general manager of grains, will take on the role of chief operating officer and upon demerger completion will become managing director and CEO of New GrainCorp.
Along with demerger of MaltCo and GrainCorp the co-op continues to actively engage with interested parties wanting to acquire part or parts of the GrainCorp portfolio, including conversations with Long-Term Asset Partners Pty Ltd (LTAP).
In December 2019, GrainCorp updated shareholders stating the co-op is waiting for “a more certain proposal” from LTAP before it moves forward with recommending a potential deal. GrainCorp noted is has not received a recent definitive update from LTAP and as a result there remains potential for GrainCorp, MaltCo or other portfolio businesses to be sold.
The demerger announcement comes after GrainCorp entered into an agreement to sell its Australian Bulk Liquid Terminals business to ANZ Terminals Pty. Ltd. for approximately A$350 million. GrainCorp noted the proposed sale is an outcome of its ongoing portfolio review.