On March 14 the CBH Group’s board unanimously rejected a proposal from the Australian Grains Champion (AGC) backed by GrainCorp to privatize the cooperative. The board said the proposal would destroy value for CBH grain grower members and their strategic network, and gives too much power to GrainCorp.
GrainCorp, CBH’s publically-owned cousin operating the largest eastern Australian grain storage network, announced on Feb. 17 it had joined a consortium that proposed privatization of CBH Group and listing the 83-year-old cooperative on the Australian Stock Exchange.
The survey shows 78% of grower members support the board’s decision to reject the AGC offer.
“It’s an important part of our business, as a member-owned organization we must stay close to our growers’ views,” Andy Crane, chief executive officer of CBH Group. “This was a slightly larger survey than normal and by expanding the survey group we are able to get statistically valid information that gives us 95% confidence that all members have the same views as those shown in the results. Interestingly these results mirror very closely the results from our grower meeting polls, which saw close to 900 growers attend over the last five weeks.”
“By doing the formal independent survey we now feel certain we have a very definite view of our growers concerns and where we should be heading on this issue,” he said.
In addition to the 78% of grower members who supported the board’s rejection of the AGC proposal, 89% of survey recipients said that they support the board’s plan to conduct a formal review of structure and governance this year.
Wally Newman, chair of CBH, said the CBH board had provided Western Australian growers with a detailed explanation as to the reasons for its unequivocal decision to reject the proposal.
In summary, these detail that the AGC proposal:
-Would result in a loss of grower control over CBH’s strategic supply chain;
-Destroys value for CBH grower members;
-Gives too much power to GrainCorp;
-Does not demonstrate a better alternative strategy for CBH or its network; and
-Does not deliver the best outcome for grower members.
Newman said losing grower control of CBH’s critical supply chain to market would be a recipe for higher costs, reduced service and lower profits for growers.
Newman said the board had worked with advisors from Deutsche Bank and King & Wood Mallesons in assessing the AGC proposal and determining not to enter into an onerous process agreement for a deal that does not represent good value for local grain growers.
“The board has heard that growers want more information on these critical issues to have their own say on the future of their CBH,” Crane said. “They are looking at a range of options and want to make sure that we have the best structure for servicing grower’s needs going forward. That may well be the co-operative model that we currently have or there may be changes we can make to better reflect growers needs.”