GrainCorp, CBH’s publicly-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.
On March 14 the CBH’s board unanimously rejected a proposal from the 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.
|Wally Newman, CBH chairman.|
“The board was unanimous in its view that the proposal did not represent value for Western Australian grain growers and it would have delivered a strategic blocking stake in CBH to east coast grain handler and competitor GrainCorp,” said Wally Newman, CBH chairman. “We surveyed our members and they were very clear — 78% of growers supported the board’s rejection of the proposal.”
The proposal to commercialize did raise the question about whether CBH should remain a cooperative. The CBH then released a booklet on Aug. 15 outlining the options, benefits and trade-offs in relation to potential changes to structure and governance.
|Brad Jones, AGC grower director.|
“We have saved growers $400 million in network rationalization charges by forcing CBH to reduce its planned gold plating of the storage and handling network from a proposed A$1.15 billion ($868 million) to A$750 million, and we have forced CBH to review its structure and governance,” said Brad Jones, AGC grower director.
During a panel discussion on July 27 at the Australian Grains Industry Conference in Melbourne, Australia, Andrew Crane, chief executive officer (CEO) of CBH, said 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.
The information booklet was created to provide unbiased information about what the different ownership and control possibilities would be and how each one potentially may impact growers. The booklet specifically mentions three options: non-distributing cooperative; distributing cooperative; and publicly-listed company. However, it does say there are other structures that could be considered for CBH.
“The feedback from most growers has been that while the CBH structural review process is under way, they want that process to reach its natural conclusion and that they are focused on the coming harvest,” Jones said. “As a grower-led movement Australian Grains Champion respects that feedback. If CBH fails to meet growers’ expectations, and there is a groundswell of growers prepared to fight for change, Australian Grains Champion may review its current position.”
In a grower letter from the AGC announcing the withdrawal of its offer, CBH stated it was pleased that, “AGC’s proposal has already had a positive impact on CBH: forcing it to commence its review and to improve the efficiency of its network restructure plan by hundreds of millions of dollars. However, these are just the first steps in the journey – it is critical for all of us and our families that CBH’s structure review does not end up as just another window-dressing exercise.”