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GrainCorp-backed bidder ditches quest to buy CBH

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GrainCorp's latest effort to build up, through acquisition, its hold over Australian grain handling has ended in failure, with the collapse of the attempt it was backing to take control of rival CBH.

Australian Grains Champion - the GrainCorp-backed consortium which seven months ago revealed plans to buy West Australia-based CBH, Australia's top grains exporter, and list it on the stockmarket – said it had "reluctantly" decided to ditch its pursuit.

Australian Grains Champion - which was also backed by fund manager First State Super and two former CBH directors - said that the withdrawal was made "in the light of CBH's ongoing complex and long-winded structure and governance review", launched after the February bid approach.

The consortium added that Monday's decision would "give all us the time, space and opportunity to focus squarely on the CBH board process and the forthcoming harvest", which is expected to be a large one in Western Australia, and indeed for the country as a whole.

'Unique and attractive'

The collapse of the deal - which would have ended up with GrainCorp taking a roughly 20% stake in the listed CBH, analysts calculated – marks a second setback to the group's attempts beef up in Australian grain handling through acquisition.

In 2010, GrainCorp agreed a takeover of AWB, Australia's former wheat export monopoly, only to be trumped by Canada's Agrium.

GrainCorp on Monday, while saying it was now quitting Australian Grains Champion, termed the consortium's offer "unique and attractive".

However, Mark Palmquist, the GrainCorp chief executive, said that, with harvest approaching, it was "appropriate to afford Western Australia growers time and space to address these other important priorities for their businesses".

'Opportunities are wide open'

Mr Palmquist added that, "as a leading Australian agrifoods business, GrainCorp will remain open to considering opportunities to support the growth and transformation of Australian agriculture".

In fact, GrainCorp itself is periodically raised as a potential takeover target for a buyer wishing to exploit Australia's position as a leading crop exporter to growing Asian import markets.

Archer Daniels Midland was three years ago blocked by Australia's government from a $2bn takeover of GrainCorp, but remains the grain handler's top shareholder.

James Fell, chief analyst at chief analyst at Australian-based grains analysis group Grain Information Services, while declining to comment on the collapse of Australian Grains Champion's bid, said that "you could say it's now a very exciting time to look at developments in such an important global grains player" as Australia.

"In light of recent developments, it looks like opportunities are wide open to international agricultural investors in the Australian grains sphere."

Support threshold

Australian Grains Champion's withdrawal follows a tour of growers in Western Australia – Australia's top wheat-growing state, where CBH has a stranglehold on the grains market.

While the consortium said it had been "enormously encouraged by the hundreds of growers who have contracts us to express support", its backing was reported as nowhere near the threshold of 75% of CBH members needed to push its bid through.

CBH itself claimed that 78% of its 4,200 growers backed its decision to reject Australian Grains Champion's bid.

The deal would have seen the consortium pay an initial Aus$600m in cash to CBH growers, who would also retain a stake in the listed company, which analysts valued at about Aus$3bn ($2.3bn).

Monday's announcement was made after the close of Sydney's stockmarket, where GrainCorp shares closed down 0.1% at Aus$8.00.

By Mike Verdin

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