GrainCorp CEO says deal with CBH still a possibility

90% of grower members agreed CBH should examine its structure on its own and 78% agreed with the rejection of the AGC proposal.

MELBOURNE, AUSTRALIA — GrainCorp Chief Executive Office Mark Palmquist said a GrainCorp-backed Australian Grain Champions (AGC) proposal to corporatize CBH Group is still a possibility.

The proposal, first made in February, was unanimously rejected by the CBH board on March 14 on the grounds it would destroy value for grower members and give too much power to GrainCorp. The proposal called for privatizing the 83-year-old cooperative and listing it on the Australian Stock Exchange. Growers would be offered a cash payment and shares in a corporatized CBH.

Mark Palmquist, GrainCorp’s chief executive officer.

“It’s still alive, it hasn’t been pulled,” Palmquist said of the proposal during a panel discussion July 27 at the Australian Grains Industry Conference in Melbourne, Australia. “We know what the response has been from the CBH board. We still believe this is a decision the owners, the growers of CBH should have the ability to make themselves. It hasn’t been put forward as a vote. I still think there is an opportunity for that to happen; we just have to wait and see where it goes.”

Andrew Crane, CEO of CBH, who also participated in the panel discussion, said the board rejected the proposal and explained its reasoning to growers. He said if the growers want to change the structure of the business, CBH is suited to do that on its own.

He said 90% of grower members agreed CBH should examine its structure on its own and 78% agreed with the rejection of the AGC proposal.

“Getting growers to agree on things isn’t easy. Those are big numbers,” Crane said. “It’s a clear rejection; it’s not a good offer for them.”

In September, CBH will talk with its growers about the different shapes of the cooperative structure and contrast that with corporatization, he said.

Andrew Crane, CEO of CBH.

“We have to ask the first question, do they want to corporatize?” Crane said. “The board will be quite dispassionate in the way it presents that to growers.”

There may be some practices grower members want to change, but that doesn’t mean they have to throw out the cooperative structure. It’s always healthy to do a structure review, Crane said, and ensure the business is doing the best for its members.

“It’s good for a cooperative to challenge itself,” he said. “Cooperatives are a strong business model when they are well run. That’s what we’re going to make sure is the case to start with and then they can compare that to other business models.”

In response to questions of whether the proposal gave too much power to GrainCorp, Palmquist noted that GrainCorp would be a minority shareholder. Palmquist, who spent more than 35 years with the cooperative CHS before joining GrainCorp in 2014, said there are pros and cons with any business structure.

“One of the issues in most cooperatives is a lot of the value is imprisoned in the balance sheet,” he said. “Part of the proposal with AGC would free up the value so it goes directly to the farmers.”