E-Malt.com News article: 2620

Australia's second-biggest listed grain company will be created with market capitalization of about $A850 million ($US594.87 million) after an announcement made on May 10 that ABB Grain Ltd will merge with fellow South Australian-based company AusBulk Ltd. Under the terms of the deal, shareholders of Ausbulk and its majority owner United Grower Holdings (UGH) will be issued with ABB shares, according to Asia Pulse. The company will trade under the name ABB Grain, with AusBulk and UGH, becoming wholly-owned subsidiaries.

The announcement from May 10 ended a month of renewed merger discussions after previous talks broke down in March when ABB and AusBulk cited differences in corporate culture and disagreements over valuations as the reason for an impasse. Shares in ABB, the world's biggest exporter of malting barley, ended the day steady at $6.13.

The number of shares in ABB will double from 48 million to between 90-94 million and a system of grower-owned A-class and B-class shares will be retained. Growers will have access to untraded A-class shares and be responsible for electing the board, which will be shrunk from 13 directors to nine after the 2006. Ninety per cent of B-class shares will also be owned by growers.

ABB managing director Michael Iwaniw, who will lead the new ABB, said the business would possess the size to drive efficiency gains and would be earnings per share positive in 2004/05. "It's very important that the companies are integrated quickly and in a single process," he told journalists.

The deal requires 75 % support from the three group's shareholders and is expected to be stitched up by September 30. Mr Iwaniw said it was too early to put a figure on the earnings boost from the expected synergies gained but advantages would come from both cost savings and increased revenue.

In a statement ABB chairman Trevor Day and AusBulk chairman Max Venning said the merged entity would be well positioned to achieve growth in processing, logistics, storage and handling.

The new ABB would provide growers with an efficient marketing channel and give their domestic and international customers a "paddock to plate" service.

ABB, the former Australian Barley Board, has a monopoly on barley exports from South Australia but that is expected to end in the future. "I wouldn't see a major change in the single desk arrangement just for a while yet but obviously there will be some change but we're not entirely sure of what that will be," Mr Day said. He said he expected the arrangement to be in place for at least another two years.

Upon completion of the merger AusBulk shareholders, excluding UGH, will hold about 30.25 per cent of ABB's B-Class shares and will receive one B-Class share for every two AusBUlk shares held on the day prior to the merger being active. UGH shareholders will hold about 34.75 per cent of ABB B-Class shares, receiving three B-Class shares for every five UGH shares held prior to the effective merger. Due to their current shareholding in AusBulk and UGH, ABB shareholders will own more than 50 per cent of ABB post-merger.

Perry Gunner, the current AusBulk deputy chairman, will be chairman of the merged entity. ABB Grain's biggest rival is the former Australian Wheat Board, AWB Ltd, which holds a monopoly on Australian wheat exports.


12 May, 2004