Agribusiness giants GrainCorp and AWB plan merger

Posted by Nicole Eckersley on 3rd August 2010

GrainCorp and AWB have signed a merger implementation agreement, which, if approved by shareholders and regulators, would see the creation of Australia’s largest agribusiness company, with a market capitalisation of over $2 billion.

GrainCorp’s shareholders will hold 58%, and AWB shareholders 42%, of the merged company.

The plan is supported unanimously by the directors of both groups.

“The merged company will have the scale to compete more effectively against the large global grain companies now competing domestically, and exporting grain from Australia, and places us in a strong position to take advantage of the growing food demand from Asia, the Middle East and North Africa,” said GrainCorp Chairman, Mr Don Taylor.

“The merged company will be one of the largest rural focused businesses in the ASX 100. Australian grain growers will benefit from stronger relationships with international buyers and a wider range of grain marketing alternatives, continued operation of AWB pools, finance and rural merchandising services. The new company will be a significant grain exporter, a leading Australian flour miller and the world’s fourth largest commercial malt producer.”

“The merger will deliver synergies of in excess of $40 million per annum. There are obvious benefits in merging the two head offices and by cutting duplication throughout the organisation,” said AWB Chairman Mr Peter Polson.

The deal is likely to come under close scrutiny from government in terms of avoiding monopoly, with Federal Agriculture Minister Tony Burke saying that his department had advised that the detailed access undertaking relating to how GrainCorp shared its port facilities with rivals would need to be reviewed by the Australian Competition and Consumer Commission. Liberal senator Bill Heffernan also said that his committee could be interested in investigating the proposed merger of the grains companies.