SYDNEY, AUSTRALIA — GrainCorp announced on Feb. 17 it has joined a consortium that is proposing privatization of CBH Group, an 83-year-old cooperative, and listing it on the Australian Stock Exchange.
The consortium, led by Australian Grains Champion (AGC), includes multiple unnamed Australian superannuation funds. AGC presented the proposal to the board of CBH with a request that it be put to CBH’s grower members.
CBH’s value would be determined through an initial public offering, GrainCorp said, but analysts have valued the Western Australian cooperative at as much as A$3 billion ($2.1 billion). GrainCorp said it would be a cornerstone investor, putting up as much as A$600 million. That would be transferred to an equity stake in CBH once it is listed and give GrainCorp a 20% stake in CBH if it was valued at A$3 billion.
“We see enormous strategic merit in the Australian Grains Champion Proposal,” said Mark Palmquist, GrainCorp managing director and chief executive officer (CEO). “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.”
CBH said it received the proposal, which, due to its complexity, will take several weeks to assess. The board expects that any process may take many months to evolve and the board will inform grower shareholders carefully through this process.
The board said it will always act in the best interest of Western Australian grain growers. CBH Group will also take advice on this matter from its financial adviser, Deutsche Bank and legal counsel, King & Wood Mallesons.
The cooperative’s annual general meeting of growers is Feb. 24. In the interim, the board recommends growers take no action, CBH said.
If CBH agrees to put the offer to its 4,200 farmer owners, the proposal would require at least 75% support to move forward. CBH’s farmer owners would receive shares in the AGC consortium and A$600 million in cash.
AGC would be the holding company of CBH and apply for a listing on the Australian Stock Exchange. Leading up to the initial public offering (IPO), growers would have the opportunity to sell up to A$400 million in additional shares during the IPO process, or hold onto their shares.
The deal would also need approval by the Australian Competition and Consumer Commission and other regulatory groups.
For full details of the proposal, click here.