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CBH rejects GrainCorp approach, amid talk of US interest

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CBH rejected an approach backed by rival GrainCorp, dismissing it as "blatantly deficient" - but kept the door open to a restructuring, and acknowledged it had received rival offers, from suitors reported to include US giant CHS.

CBH, Australia's top wheat exporter, said it had voted unanimously to block a bid from the Australian Grains Champion consortium which would have seen the co-operative listed in Sydney, with GrainCorp owning a sizeable minority stake.

The approach "offered no long-term value" to CBH's farm members, and "would deliver a strategic blocking stake" in the co-operative to GrainCorp "at a discount rather than a premium", said Wally Newman, the CBH chairman.

"This proposal will ultimately result in increased fees and charges for growers and offers no clear plan for the future," Mr Newman added, underlining concerns that a listed company would prioritise returns for shareholders over perks on the likes of storage and transportation costs that CBH says it offers growers.

"The GrainCorp-backed proposal offers no long term value, no guarantees and no real future growth for grain growers" in Western Australia, Australia's biggest wheat-growing state, where CBH handles the vast majority of grain volumes.

Rival suitors

However, Mr Newman acknowledged the appetite among some of 4,200 farmer members for a review of the best structure for CBH which, with an estimated value of some Aus$3-4bn ($2bn-3bn), holds considerable value on their behalf.

Unveiling a review, which will be completed by the end of September, He said it was "clear Western Australia growers wanted the opportunity to consider how best to structure CBH for the future".

Indeed, the Australian Grains Champion proposal was only one that CBH had attracted.

"We have received several inquiries from other interested parties," Mr Newman said, adding that this "only serves to highlight the range of options available for our future structure and for our members".

CHS interest?

According to a report in the West Australian, the list of alternative suitors includes Minneapolis-based CHS, the top US agricultural co-operative, which achieved earnings of $781m for the year to the end of August.

Mr Newman has confirmed that CHS, long considered a role model for CBH, has contacted the Western Australian co-operative, the newspaper said.

CHS has a listing on the Nasdaq exchange, but of preferred shares which carry no voting rights "except in limited circumstances required by law", allowing the group to keep control among its 600,000 farmer owners.

CHS has a long history of expanding abroad through partnerships, often in 50:50 deals – and indeed has already bought 50% stakes in Australian grain traders Broadbent Grain and Agfarm, the latter in a partnership with farm services group RuralCo.

Ironically, GrainCorp has as its chief executive Mark Palmquist, a former CHS chief operating officer.

By Mike Verdin

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