CBH unloads on AGC corporatisation pitch

Big consultation exercise follows claims about the weaknesses of the bid

CBH unloads on AGC corporatisation pitch
CBH wants to fend off a proposal it argues would give a rival a blocking stake.


Co-operative Bulk Handling Group (CBH) has rejected the Australian Grains Champion (AGC) corporatisation proposal and is undertaking a 22-stop consultation with its membership to discuss its future.

The grain logistics and marketing cooperative’s board gave five main reasons for blocking what it calls an "unsolicited, incomplete and conditional" proposal.

CBH chairman Wally Newman says the offer lacks transparency, offers no long-term value to Western Australian growers and will deliver a strategic blocking stake in CBH to east-coast grain handler and competitor GrainCorp.

"After careful consideration the Board has … written to AGC advising that we reject the proposal and will not enter into AGC’s Process Agreement," Newman states.

"This unsolicited bid would see Western Australian grain growers lose control of CBH’s strategic supply chain and GrainCorp acquire a strategic stake in CBH at a discount rather than a premium.

"We will not enter into an arrangement that does not recognise the investment of generations of Western Australian farmers.

"This proposal will ultimately result in increased fees and charges for growers and offers no clear plan for the future."

CBH claims the AGC proposal, if accepted, will:

  • result in a loss of grower control over CBH’s strategic supply chain
  • destroy value for CBH grower members
  • give too much power to GrainCorp
  • not demonstrate a better alternative strategy for CBH or its network
  • not deliver the best outcome for grower members.

Newman says losing grower control of CBH’s supply chain to market would be a recipe for higher costs, reduced service and lower profits for growers. 

"The AGC proposal would result in significant cash leakage from the CBH Group, in turn this would result in less funds being available for ongoing network investment," he continues.

"The GrainCorp-backed proposal offers no long term value, no guarantees and no real future growth for WA grain growers."

The board had worked with advisors from Deutsche Bank and King & Wood Mallesons to assess the AGC proposal and determining not to enter into an onerous Process Agreement for a deal that does not represent good value for local grain growers.

"AGC’s proposed Process Agreement would also provide GrainCorp with access to confidential information," Newman says.

"The CBH Group Board is acutely aware of our co-operative’s position as a world-class grain business and we could not accept such a blatantly deficient proposal.

"We have received several inquiries from other interested parties which only serves to highlight the range of options available for our future structure and for our members."       

The six-week consultation exercise starting on Friday should result in September 30 report to members.

"We are committed to giving growers the final say on the future of CBH."   

AGC director Brad Jones says his firm was expecting the response.

"We are not the least bit surprised the CBH Board has taken this decision," Jones adds.

"At no stage has the CBH Board sought to engage in a discussion about the merits of the Proposal and so this was always going to be a disappointing but entirely predictable outcome.

"Nonetheless I cannot help but wonder on what basis the non-grower directors, in particular, have satisfied themselves that the Boards’ position is in the best interests of growers.

"Growers are very disappointed that the CBH Board is blocking them from seeing a balanced assessment and full details of the Proposal.

"At grower meetings in the past few weeks, the overwhelming majority of growers have confirmed they want to see the Proposal.

"The response from growers to date has been extremely encouraging and on this basis we will continue to work with the members of CBH to evaluate all options to ensure they, not the Board, have the chance to consider the Proposal and vote on its merits."

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