World Grain - August 2010 - 10

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GrainCorp, AWB to merge
SYDNEY, AUSTRALIA - GrainCorp Limited and AWB Limited
announced on July 30 that they have entered into a merger implementation deed (MID) under which GrainCorp will merge with
AWB.
The merger will create one of Australia's largest diversified agribusinesses, operating in the grains, merchandise, fertilizer and livestock sectors and the world's fourth largest commercial malt producer. Combined company market capitalization is estimated at over
A$2 billion. Directors of both companies unanimously support the
proposal.
GrainCorp will issue to AWB shareholders one GrainCorp share
for every 5.75 AWB shares they own subject to an AWB shareholder
vote. The transaction will result in a nil premium merger
with the exchange ratio based on the volume weighted
average prices of shares in each company over the last
six months.
GrainCorp's shareholders will hold 58%, and AWB
shareholders 42%, of the merged company.
The directors of AWB will commission an independent expert's report to determine whether the scheme is
in the best interests of AWB shareholders.
Subject to the independent expert confirming that the
scheme is in the best interests of shareholders and absent a superior proposal, each of the directors of AWB
will recommend that AWB shareholders vote in favor
of the scheme and the removal of the 10% shareholder
cap to permit the scheme, and have indicated they intend
to vote in favor of the scheme and the shareholder cap
removal in relation to their own shares.
The necessary regulatory processes are expected to be
completed during the second half of 2010.
AWB has agreed to customary obligations that limit
its ability to engage with third parties on a competing
proposal, although these obligations are subject to fiduciary exceptions.
GrainCorp Chairman Don Taylor said, "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.
"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."

AWB Chairman Peter Polson said "The merger will deliver synergies in excess of A$40 million per annum. There are obvious benefits
in merging the two head offices and by cutting duplication throughout the organization.
"The business and geographic diversification that results from
combining these two companies delivers a more stable earnings profile for shareholders, with the potential for increased revenues and
reduced earnings risk across the company's operations."
Under the merger proposal, Polson will become chairman of the
new company and Taylor will become deputy chairman. Alison Watkins, managing director of GrainCorp, would become managing director. The chief financial officer (CFO) of AWB, Philip Gentry, will
become CFO of the merged entity. The two boards will
merge.
The senior management team of the combined company will be drawn from the current management teams
of both GrainCorp and AWB.
The merged entity will operate as GrainCorp Limited.
The corporate head office will be located in Sydney, Australia, and business functions shared across the locations
where best suited.
The intention, in the absence of unforeseen circumstances, is for GrainCorp to pay a final fully franked dividend of approximately A10¢ per share, to which AWB
shareholders will be entitled following implementation
of the scheme, and a A5¢ per share fully franked special
dividend to all shareholders of the merged company.
Subject to the Supreme Court making appropriate orders, it is currently expected that AWB shareholders will
be sent scheme documentation in September. This will
contain the basis for the AWB board's recommendation
and an independent expert's report.
AWB shareholders will vote at a scheme meeting, expected to be held in late 2010. If the court makes an order approving
the scheme, the scheme will become effective on the date determined
by the court, and GrainCorp and AWB will become bound to implement the scheme.
The AWB Board has considered a range of alternative proposals,
including the previously announced commodities transaction with
Gavilon LLC, however has concluded that the proposed merger with
GrainCorp creates more value for shareholders. Should a superior
proposal emerge, the AWB board would consider it on its merits and
advise shareholders accordingly.
The board reviewed the company's guidance and now anticipates
that its profit before tax and significant items (PBT) for continuing
businesses for the full year ending Sept. 30 will be within the range
of A$75 million to A$95 million compared to previous guidance of
A$85 million to A$110 million.

August 2010 / World Grain / www.World-Grain.com

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World Grain - August 2010

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