GrainCorp announces intent to demerge

GrainCorp, which has been the subject of sale negotiations for months, today announced its intention to demerge its global malting business, pending shareholder and other approvals.

The proposed demerger would result in two independent ASX-listed companies, MaltCo and New GrainCorp.

MaltCo would operate as a global malting and craft brewing distribution business while New GrainCorp would operate as a domestic and international grain handling, storage, trading and processing business focused on grains, oilseeds, pulses, edible oils and feeds.

A GrainCorp spokesperson told Brews News that GrainCorp’s New Zealand-based Cryer Malt business would fall under MaltCo if the demerger goes through.

Following the proposed demerger, MaltCo will be the world’s fourth largest independent maltster with malting houses in the United States, Canada, Australia, and the United Kingdom. MaltCo also operates Country Malt Group, a leading craft malt distribution business in North America.

In FY18, MaltCo generated EBITDA of $170 million.

Following the proposed demerger, New GrainCorp would be an integrated global agribusiness with grain handling, storage, trading and processing operations in Australia, New Zealand, North America, Asia, Europe and Ukraine, focused on grains, oilseeds, pulses, edible oils and feeds. New GrainCorp would operate the largest grains storage, transport and marketing network in eastern Australia as well as Australasia’s largest integrated edible oils business.

New GrainCorp’s storage and logistics infrastructure assets comprise 145 country receival sites, with 20 million tonnes of storage capacity and seven bulk grain export terminals.

The company said that this infrastructure plays a critical role in the eastern Australian grain export supply chain.

The assets comprising New GrainCorp generated FY14-FY18 average EBITDA of ~$125 million before corporate costs.

The demerger of MaltCo would also enable and accelerate a number of business-process-simplification and cost-reduction initiatives across New GrainCorp. The company said that these initiatives are expected to deliver an annualised cost reduction of approximately $20 million.

GrainCorp Chairman Graham Bradley said in a media release that the proposed demerger would unlock significant value for shareholders. By establishing two unique and high-quality ASX-listed agribusinesses with focussed management teams, Bradley said the two companies would be able to better pursue independent strategies and growth opportunities.

GrainCorp CEO Mark Palmquist said in a media release that the company’s Portfolio Review made clear that the businesses have different characteristics and would benefit from operating separately.

“A demerger would provide both MaltCo and New GrainCorp with increased flexibility to implement independent operating strategies and capital structures and allow them to attract investors with different investment priorities,” Palmquist explained.

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