E-Malt.com News article: 2452

Australia: A merger of two of the country's biggest grain companies - AusBulk and ABB Grain - is set to be negotiated within two weeks, despite the last talks between the two collapsing less than a month ago, Metro posted on April 3. As flagged in this paper on Wednesday, the two South Australian-based companies announced yesterday they had resumed discussions over a merger, just days after a sudden board spill at AusBulk, which saw its previous long-standing chairman and deputy chairman replaced. AusBulk's new chairman, Max Venning, said they had determined that discussions would resume with new approaches tabled to resolve the outstanding issues, which had led to the previous breakdown.

The main disagreement was over the two grower-controlled companies' relative valuations, with AusBulk unlisted but ABB Grain trading at near-record highs during the talks. A further dispute surrounded the role of United Grower Holdings, which controls 54 per cent of AusBulk.

It is understood ABB Grain has shifted its position and the two companies are now confident of reaching agreement and signing a memorandum of understanding on a merger in around two weeks, ahead of a joint board meeting to conclude the deal. That would allow the merger to be put to shareholders, who will have to give 75 per cent support, in time for it to be in operational before next harvest.

It will also save AusBulk pursuing its own listing on the Australian Stock Exchange, which it had resumed planning for in July. "Renewed talks have commenced and the signs are very encouraging," ABB Grain's chairman Trevor Day said. To minimise the required constitutional change, it is likely Ausbulk would be absorbed into ABB Grain's existing dual-class share structure, with UGH converting its holding into B-class investor shares.

ABB Grain shares closed 3 lower yesterday at $6.27 before the announcement was made, capitalising it at $307 million. Analysts have estimated the merged entity would have a capitalisation of $700 million to $800 million, with synergies in the order of $16 million a year.

AusBulk is the dominant grain storage and handling group in South Australia and has become one of the country's biggest maltsters in the past two years with the acquisition of Joe White Maltings. ABB Grain is the major barley marketer in South Australia and Victoria.


06 April, 2004