World Grain - April 2016 - 10

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CBH rejects AGC's privatization proposal
WEST PERTH, AUSTRALIA - The CBH Group said on March 14
its board unanimously rejected a proposal from the Australian Grains
Champion (AGC) backed by GrainCorp to privatize the cooperative. The board said the proposal would destroy value for CBH grain
grower members and their strategic network, and gives too much
power to GrainCorp.
Brad Jones, AGC director, said AGC is not surprised at the CBH
board's decision, noting that the board never engaged in a discussion
about the merits of the proposal.
CBH Chairman Wally Newman said the proposal from the AGC
lacks transparency, offers no long-term value to Western Australian
growers and would deliver a strategic blocking stake in CBH to east
coast grain handler and competitor GrainCorp.
"After careful consideration the board has today written to AGC
advising that we reject the proposal and will not enter into AGC's
process agreement," Newman said. "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 recognize 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," he said.
GrainCorp, CBH's publically-owned cousin operating the largest
eastern Australian grain storage network, announced on Feb. 17 it
had joined a consortium that proposed privatization of CBH Group
and listing the 83-year-old cooperative on the Australian Stock Exchange.
The proposal, which is backed by GrainCorp and H.R.L. Morrison, offers growers a cash payment and shares in a corporatized
CBH. AGC presented the proposal to the board of CBH with a request that it be put to CBH's grower members.
CBH had requested further information from AGC on Feb. 24, but
on Feb. 26 AGC declined to provide further information.
AGC attempted to address some of CBH's concerns in March by
retracting its demand for exclusivity and an approximate A$16 million
($11,935,149) break fee as part of its proposed process agreement.
Newman said the CBH board had provided Western Australian

growers with a detailed explanation as to the reasons for its unequivocal decision to reject the proposal.
In summary, these detail that the AGC proposal:
*
Would result in a loss of grower control over CBH's strategic
supply chain;
*
Destroys value for CBH grower members;
*
Gives too much power to GrainCorp;
*
Does not demonstrate a better alternative strategy for CBH
or its network; and
*
Does not deliver the best outcome for grower members.
Newman said losing grower control of CBH's critical supply chain
to market would be a recipe for higher costs, reduced service and
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the CBH Group. In turn, this would result in less funds being available for ongoing network investment," he said. "The GrainCorpbacked proposal offers no long-term value, no guarantees and no real
future growth for WA grain growers."
AGC's Jones said growers are very disappointed that the CBH
board is blocking them from seeing full details of the proposal.
"At grower meetings in the past few weeks, the overwhelming
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Jones said. "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."
Newman said the board had worked with advisors from Deutsche
Bank and King & Wood Mallesons in assessing 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 Grain&RUS ZLWK DFFHVV WR FRQ¿GHQWLDO LQIRUPDWLRQ´ KH VDLG ³7KH &%+
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
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"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," Newman said.

China remains world's largest soybean importer
WASHINGTON, D.C., U.S. - China's domestic oilseed production
growth continues to be hampered by limited arable land and recent domestic policies favoring grain production, the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service said in a March 15 report.
China's total planted area for all oilseed crops is forecast to drop
2% to 21.87 million hectares and total oilseed production is forecast
to decrease by 2.1% to 52.7 million tonnes in 2016-17. The lower
IRUHFDVWUHÀHFWVDQH[SHFWHGGHFOLQHLQUDSHVHHGDQGFRWWRQVHHGSURduction. The forecast for soybean production is up slightly, primarily
affected by changes in grain policies.
10

In market year 2016-17, the total Chinese oilseed consumption
forecast rose to 142.9 million tonnes driven by increasing domestic
demand for meats, seafood and vegetable oils. Additionally, the expansion of the oilseed crushing sector, growth in the feed industry,
and advancements in concentrated livestock and aquatic farming are
collectively spurring demand and the need for imports.
With limited domestic production, soybean imports remain robust
with total oilseed imports forecast at 89.2 million tonnes for market
year 2016-17. Soybean imports could reach 84.5 million tonnes, up
from the estimated 82 million tonnes in market year 2015-16.
April 2016 / World Grain / www.World-Grain.com

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World Grain - April 2016

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