GrainCorp’s global malting spinoff gets shareholders’ blessing

Canada Malting to go to new owner, United Malt Group

Shareholders in the Australian owner of Canada’s biggest malt company have voted nearly all in favour of a spinoff for their worldwide malting assets.

During their general meeting Monday in Sydney, participating shareholders in GrainCorp voted over 99 per cent in favour of resolutions which will see the company’s malt business become a standalone ASX-listed company, named United Malt Group Ltd.

Pending court approval of the “demerger,” which is expected at a hearing Friday in Australia’s Federal Court, United Malt will become “the world’s fourth largest independent commercial maltster,” GrainCorp said.

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If court approval is granted as expected, shares in United Malt (ASX:UMG) would begin trading March 24 on a deferred settlement basis, then on a normal settlement basis starting April 2.

United Malt’s holdings are to include malting houses in the U.S., Canada, Australia and the U.K., as well as Country Malt Group, the company’s North American craft malt distribution business.

GrainCorp chairman Graham Bradley, speaking to the meeting Monday, said the United Malt business holds “strong market shares in these countries in the growing craft brewing and Scotch whisky sectors.”

United Malt’s Canadian assets are under the purview of Calgary-based Canada Malting, which produces about 400,000 tonnes of malt per year.

Canada Malting’s business includes malting plants at Calgary, Montreal and Thunder Bay, nine country elevators across the three Prairie provinces, and the Country Malt facilities at Delta, B.C., Didsbury, Alta. and Brampton, Ont.

Canada Malting’s history dates back to 1902, when it formed in the merger of three Ontario malting companies. GrainCorp bought the business in its 2009 takeover of the Canadian firm’s then-parent.

GrainCorp first announced its demerger proposal in April last year. Bradley reiterated Monday the deal “has the potential to unlock significant value for shareholders.”

GrainCorp’s board believes the “full value” of the malt business “has not been fully recognized by investors in recent years as it has formed part of a broader group whose business is affected by the variability of weather and crop cycles” along Australia’s east coast, he said.

Eligible GrainCorp shareholders will get one United Malt Group share for each GrainCorp share they hold as of March 25 this year. They’ll also retain their GrainCorp shares and can then opt to keep or sell either or both, the company said.

GrainCorp itself will also hang onto a 10 per cent stake in United Malt Group, Bradley said, “not as a strategic investment but as a valuable liquid non-core asset to provide GrainCorp with additional balance sheet resources and financing flexibility.”

‘Ongoing investment’

GrainCorp said last April its post-demerger focus will be on” building and developing its global grain and oilseeds origination network, including through ongoing investment in the GrainsConnect Canada supply chain and growth into new markets in the Black Sea and Indian subcontinent.”

Calgary-based grain handler GrainsConnect Canada — a joint venture between GrainCorp and Japan’s Zen-Noh Grain — today operates four Prairie inland grain terminals, two each in Saskatchewan and Alberta.

In a separate joint venture, GrainsConnect and Winnipeg grain firm Parrish and Heimbecker are building Fraser Grain Terminal, a Vancouver export facility expected to handle up to four million tonnes of grains, oilseeds, pulses and other commodities per year. Construction is expected to be complete in December this year.

GrainCorp last spring said its plan calls for GrainsConnect to “expand (its) origination footprint in Canada and enable (a) multi-origin service offering to customers in Asia and MENA,” referring to the Middle East and North Africa.

The post-demerger GrainCorp “will be initially structured with low core debt,” thanks mainly to the recent sale of its Australian Bulk Liquid Terminals business, Bradley said Monday.

GrainCorp’s earnings and cash flow, he said, will still be “variable from year-to-year based on weather and crop cycles.”

But the company this year also set up a new 10-year crop production contract, which for a “modest annual premium” will provide payment of up to A$80 million in “very poor crop years.” — Glacier FarmMedia Network

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