E-Malt.com News article: 2427

Australia: A sudden boardroom spill at grain group AusBulk just months before its listing has cleared the way for an early resumption of failed $700 million merger talks with barley marketer ABB Grain, World-Grain posted on March 31. AusBulk's chairman of eight years, Kevin O'Driscoll, resigned during a board meeting on March 29, citing personal reasons. While Mr O'Driscoll's health had deteriorated during and after the recent unsuccessful merger talks with ABB Grain, it is understood he also stood down because he had lost the support of a majority of fellow directors. He was replaced by Max Venning, a farmer from Bute, in mid-north South Australia, who joined AusBulk's board 18 months ago.

Mr O'Driscoll's deputy of three years, Adrian Glover, was also replaced, by non-grower director Perry Gunner, a director of McGuigan Simeon Wines, So Natural Foods and a former chairman and chief executive of Orlando Wyndham.

The merger of the two South Australian grain companies has long been considered a logical step in the frenzy of rationalisation in the $9 billion grain industry over the past decade which has reduced the number of major players from 15 to five. But a second attempt at a merger collapsed last month after a failure to agree on Ausbulk's valuation, a dispute set to be substantially resolved by its planned listing in July.

There was also disagreement over the post-merger role of United Grower Holdings, a grower-owned entity which controls just under 54 per cent of AusBulk. At the end of the merger talks, ABB Grain, which listed in 2002, was sitting on a near record share price of $6.15, or a market capitalisation of $300 million, nearly double its level a year earlier.

The stock hit a new record close of $6.70 a week ago, but fell a further 17 on March 30 to $6.30. Mr Venning said he had always been a strong supporter of the merger and would like to revisit the move when appropriate. As a relatively new director, he said he carried little cultural baggage, a factor insiders have constantly raised as a further hurdle to merging the two companies. He said the form of AusBulk's listing was yet to be determined but a compliance listing was possible, given it was cheaper and AusBulk had no immediate requirement for capital.

But he also said UGH would be able to retain effective control of the group with significantly less than 50 per cent. Ausbulk is the dominant grain handling and storage body in South Australia but has expanded in the past couple of years into one of the country's biggest barley maltsters after taking over Joe White Maltings.

ABB Grain is the dominant barley marketer in South Australia and Victoria. It lost its monopoly over barley exports in Victoria several years ago but still has a monopoly over South Australia's barley exports, although that is currently under review. The two had combined revenue last financial year of just under $1 billion. ABB Grain posted a record after-tax profit of $15 million, while AusBulk made $55 million in 2001-02 before dropping to a drought-inflicted $11.1 million last year.


02 April, 2004