The combined purchase price of A$472 million ($489.8 million) is based on a valuation of A$302 million for Gardner Smith’s and Integro’s enterprise value of A$170 million.
Gardner Smith is Australia’s second largest oilseed crusher, a leading operator of bulk liquid port terminals and operates complementary used oil recycling and animal feed businesses. Integro is a leading Australian and New Zealand refiner and packager of edible fats and oils for food industry customers.
GrainCorp Managing Director and Chief Executive Officer Alison Watkins said the acquisitions were consistent with the company’s strategic focus on its three core grains — wheat, barley and canola.
“The opportunity to combine Gardner Smith and Integro into a larger business is a clear and logical fit with our business model. Together they build on GrainCorp’s existing supply chain management and grain marketing expertise and expand our downstream processing operations into canola and other edible oils,” Watkins said. “GrainCorp Oils will provide us with immediate scale in the edible oils sector in Australia and New Zealand.
“The business can crush more than 300,000 tonnes of oilseeds annually and has 280,000 tonnes of annual edible fats and oils refining and packaging capacity. Its 13 bulk liquid port terminals have high capacity utilization, with room to grow, and already handle up to 1 million cubic meters of bulk liquids each year.
“Both Gardner Smith and Integro offer us leading positions along the edible oils supply chain. While both are very good businesses in their own right, it is the combination of the two into a cohesive whole that allows us to unlock additional value for GrainCorp’s shareholders, connects the grain growers who use our network more closely with edible oils customers, and creates a seamless and compelling offer for those customers,” she said.
Watkins said the combined GrainCorp Oils business would be expected to provide:
• a more compelling offer for edible oils customers, by providing improved commodity risk and supply chain management;
• a platform for growth, such as the potential for expansion of capacity at existing terminal sites;
• reduced earnings volatility through further diversifying operations into alternative agribusiness cycles;
• the ability to capture value at additional points along the edible oils supply chain and opportunity to identify and realize further integration benefits.
GrainCorp Oils will benefit from a long-term supply agreement with Goodman Fielder, under which it would provide approximately 40% of Integro total annual volumes.
Sam Tainsh will be appointed as group general manager of GrainCorp Oils. Tainsh has been with GrainCorp for more than 11 years, most recently as the general manager of GrainCorp marketing. Klaus Pamminger, currently trading manager with GrainCorp marketing, will be appointed general manager of GrainCorp marketing and will join GrainCorp’s executive team.
GrainCorp said that Tainsh will work closely with the leadership teams and employees of Gardner Smith and Integro to ensure a smooth integration, to provide a streamlined service to customers and to capture the synergies.
“The three businesses know each other well and there is a strong cultural fit between us,” Watkins said.
Group Managing Director of Gardner Smith Chris Morkane said: “The opportunity to combine our group with another leading Australian agribusiness like GrainCorp, whose operations, culture and values are so aligned with ours, was very important to us. Gardner Smith is excited about the opportunities created for our people and the enhanced offering for our customers generated by the new, integrated business.”
Goodman Fielder Chief Executive Officer Chris Delaney said: “We are very pleased with the outcome of this transaction, which enables Goodman Fielder to concentrate our investment and internal resources on our core categories and brands. We have also structured a long term supply partnership with GrainCorp to ensure Goodman Fielder maintains an efficient supply of strategic raw materials. This transaction is also a positive result for the staff at Integro. The combination of GrainCorp’s expertise along the grain supply chain and Gardner Smith’s oils expertise offers significant opportunities to support Integro’s continued growth in the region.”
Each of the acquisitions is expected to complete during October 2012, on satisfaction of closing conditions.
“Due to the ongoing strong performance of our businesses, I’m confident our 2012 financial year earnings will come in around the upper end of our guidance ranges of A$385-A$415 million EBITDA and A$185-205 million Underlying NPAT7,” Watkins said. “In terms of FY13, across eastern Australia’s grain belt, the winter crop remains in generally good condition however, as always, a good spring break will be critical. Industry production forecasts for eastern Australia’s wheat, barley and canola crop are currently in the 16-17.9 million tonne range. There are strong forward bookings from exporters on our shipping stem.
“While we’re expecting the global malt market to remain challenging, we have made good progress with our FY13 sales, forward selling more than 70% of our production capacity, and remain confident we have the right strategy and competitive position.”