The A$5 per share offer represents a 45.3 per cent premium to United Malt’s last close of A$3.44. Trading in shares of the company was halted on Monday.

InVivo, which acquired agribusiness peer Soufflet last year, has said it aims to become the world’s top malt producer within five years through external growth.

Earlier this year, it signed an agreement to take over Belgian malthouse Castle Malting, one of the oldest producers of the beer ingredient in the world.

Malteries Soufflet is the largest commercial maltster in Europe and the second largest globally.

United Malt disclosed it first received an offer of A$4.15 per share in December, followed by several others from the French firm. The latest proposal was made on March 14.

The company has granted Soufflet exclusive access to conduct a due diligence.

United Malt is the world’s fourth largest commercial maltster, producing bulk malt for brewers, craft brewers, distillers and food companies. The company has processing plants in Canada, the U.S., Australia and the United Kingdom.

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 Country Malt facilities at Delta, B.C., Brampton and Calgary. The Country Malt packaging plant in Calgary was set up at the Canada Malting plant site in 2019.

United Malt was acquired by Australia’s GrainCorp in 2009 and spun off in 2020. GrainCorp retains an 8.5 per cent stake in the firm, while investment firm Tanarra Capital is United Malt’s largest shareholder.

Neither of the companies immediately responded to Reuters requests for comment on the offer.

— Reporting for Reuters by Harish Sridharan in Bangalore.

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Carlsberg Group on Wednesday announced an all-cash deal worth $4 per share for all shares of Waterloo Brewing, which bills itself as the largest Canadian-owned brewery in Ontario and a pioneer of the current “craft brewing renaissance” in Canada.

The deal still requires court approval — and approval from TSX-traded Waterloo’s shareholders, although Carlsberg has already signed up Waterloo company directors and officers holding a combined stake of about 39 per cent, with “irrevocable” support and voting agreements.

A committee of Waterloo independent directors is also recommending the remaining shareholders vote in favour of the deal, on which the two companies expect to close early in the first half of the new year.

In business since 1984, starting as Brick Brewing and rebranding in 2019, Waterloo Brewing produces the Waterloo line of premium craft beers and a “value” brand, Laker.

It also holds the Canadian rights to Seagram Coolers and the LandShark and Margaritaville beverage lines, and already has been producing Somersby cider in Canada on Copenhagen-based Carlsberg’s behalf since 2020.

“One of the priorities of our SAIL’27 strategy is to grow our business in attractive markets where we are small today, such as Canada,” Carlsberg CEO Cees ‘t Hart said in a separate release Thursday. Buying Waterloo Brewing, he said, “significantly improves our growth prospects in the Canadian market.”

“This exciting opportunity will scale our business in Canada. The brand portfolios are complementary. Local sourcing will secure long-term robustness of supply, and increase commercial flexibility and speed to market for innovations, step-changing the way we operate,” Carlsberg Canada managing director Anders Rud Jørgensen said in the same release.

Waterloo Brewing’s portfolio of “long-standing co-packing relationships will benefit from these combined operations,” he added.

“We’ve enjoyed a close relationship with Carlsberg and are excited about becoming part of one of the largest brewing companies in the world,” Waterloo Brewing CEO George Croft said in Wednesday’s release, adding the the board “is confident that joining Carlsberg is the best long-term solution for our employees, partners, customers, consumers and community.”

Waterloo on Wednesday also announced results for its third quarter ending Oct. 30, reporting declines in both net revenue and gross profit in what Croft described in a separate release as “a challenging year for the industry.”

Waterloo said it’s “continuing to see consumers trade-down as a result of ongoing inflationary pressures,” which has led to sales growth for the Laker brand but has “negatively impacted the company’s premium beer brands and ready-to-drink products, which is putting pressure on gross margin.”

Waterloo has since raised the price on its single-serve 473-millilitre Laker cans, a change it said is “consistent with the balance of the industry and will have a significant and positive impact on gross margin in the fourth quarter.”

The company also reported renewals with “strategic” co-manufacturing partners, which it said will result in about $18 million of combined revenue over the extended terms of those contracts.

For its last full fiscal year ending Jan. 31, 2022, Waterloo had booked $5.803 million in net income on $180.825 million in gross revenue, up from $3 million on $156.8 million in the previous fiscal year. — Glacier FarmMedia Network

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Peter Watts, managing director of the Canadian Malting Barley Technical Centre in Winnipeg, said rising demand from China is also raising prices for feed barley, urging growers to sell their crop and deplete domestic supply.

“They’re emptying their bins and prices have remained really strong,” he said, adding that carry-out stocks will be “very low” this year.

He added that 500,000 tonnes of new crop have already been slated for export to China this year. Domestic supply has already been reduced so much that high-quality malting barley has found its way to feed channels.

“In a year like this, (the barley) may be malt quality but the prices are so strong that producers have decided to take the cash and sell their malting barley into the feed sector,” Watts said. “It’s too bad to lose that good-quality malting barley, but if the livestock industry’s willing to pay for it, that’s where producers are going to sell it.”

In Agriculture and Agri-Food Canada’s latest forecast from January, seeded area for Canadian barley is expected to decrease seven per cent to about 7.17 million acres in 2021-22, citing competition from oilseeds. Meanwhile, production would decline by 12 per cent to 9.5 million tonnes.

Watts disagrees with that assessment. “We could see a five to 10 per cent increase in seeded area,” he predicted.

“I think producers will respond by seeding more barley this year, given the good prices. Assuming an average yield, we might see a bump in production next year.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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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.

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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GrainCorp stock dropped 11 per cent at the open of trade on Tuesday to hit close to where it stood preceding the bid, before recouping some of those losses to trade at $8.18 (all figures A$). The broader market opened half a percentage point higher.

The little-known asset manager had made an offer of $10.42 per share in December 2018, as drought wilted crops across Australia’s east coast and limited GrainCorp’s ability to earn revenue from international grain trading.

“Had due diligence supported our operational assumptions, we are confident we would have turned the LTAP proposal into a binding offer as contemplated,” LTAP chairman Tony Shepherd said in a separate release late Monday.

Investor attention will now turn to the current growing season, which is predicted to be poor, said Belinda Moore, an analyst at Brisbane stockbroker Morgans.

“LTAP’s withdrawal raises concerns about the due diligence process and GNC’s outlook,” she wrote in a note to clients.

“Before LTAP’s proposal, GNC’s share price was $7.30. Since this time, its outlook has deteriorated further and the company now looks likely to report a loss in FY20.”

Lack of information on the offer had held back GrainCorp from recommending the deal to its shareholders in December.

GrainCorp is in the process of splitting the company into two businesses — with plans to spin off and list its global malting unit — and restructuring its grain business.

GrainCorp’s Canadian assets include Canada Malting, which would join the planned malting spinoff, dubbed MaltCo.

GrainCorp is also a joint venture stakeholder in Calgary-based Prairie grain handler GrainsConnect Canada, with Japan’s Zen-Noh Grain.

GrainsConnect, in turn, is also a j.v. partner in Fraser Grain Terminal, a new Vancouver port facility, with Winnipeg grain firm Parrish and Heimbecker.

Last month, Sydney-based GrainCorp had said it was engaging with suitors vying for parts or all of the company, including LTAP.

The Australian government had blocked a $2.8 billion takeover of GrainCorp by U.S. agribusiness giant ADM in 2013 following pressure from grain growers.

— Reporting for Reuters by Tom Westbrook in Sydney and Aditya Soni in Bangalore. Includes files from Glacier FarmMedia Network staff.

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Sydney-based GrainCorp announced Thursday it plans to “demerge” its global malting business from its grains and edible oils business, forming two separate ASX-listed companies: MaltCo and “New GrainCorp.”

GrainCorp shareholders would get MaltCo shares proportionate to their stakes in GrainCorp if the company completes the demerger as expected by the end of calendar 2019.

GrainCorp said it expects annual savings of about $10 million by integrating New GrainCorp’s grains and edible oils businesses, cutting out duplication of costs and corporate functions, plus $10 million in “business simplification initiatives” coming out of the separation of MaltCo (all figures A$).

MaltCo, the company said, would be the world’s fourth largest independent maltster, operating 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.

MaltCo, GrainCorp said, would have the benefit of “high-quality, low-operating-cost processing assets strategically located in premium barley-growing regions.”

In Canada, those assets are under the purview of Calgary-based Canada Malting, which produces about 400,000 tonnes of malt per year.

The Canadian assets include 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 in 2009 bought Canada Malting in a takeover of its then-parent, United Malt Holdings.

MaltCo, which in fiscal 2018 yielded EBITDA (earnings before interest, taxes, depreciation and amortization) of $170 million, is to focus on “further developing its international portfolio.”

Specialty malt, whisky and craft beer markets “are experiencing substantial growth,” GrainCorp said Thursday, and MaltCo will have “sufficient balance sheet flexibility to support the capital investment required to capture these growth opportunities.”

‘Ongoing investment’

New GrainCorp, after the demerger, would be an “integrated global agribusiness with grain handling, storage, trading and processing operations in Australia, New Zealand, North America, Asia, Europe and Ukraine, focused on grains, oilseeds, pulses, edible oils and feeds.”

GrainCorp said New GrainCorp’s strategic 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 — on Tuesday opened its third Prairie grain terminal at Vegreville, Alta. and plans to open a fourth at Huxley, Alta. this fall.

In a separate joint venture, GrainsConnect and Winnipeg grain firm Parrish and Heimbecker are building Fraser Grain Terminal, a Vancouver export terminal expected to handle up to four million tonnes of grains, oilseeds, pulses and other commodities per year following its completion, expected next year.

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

“Our portfolio review made clear that these businesses have different characteristics and would benefit from operating separately,” GrainCorp CEO Mark Palmquist, who in the demerger would become MaltCo’s new CEO, said Thursday in a release.

“A demerger would provide both MaltCo and New GrainCorp with increased flexibility to implement independent operating strategies and capital structures and allow them to attract investors with different investment priorities.”

Klaus Pamminger, now general manager of GrainCorp’s grains group, would become CEO of New GrainCorp following the demerger.

While the MaltCo demerger progresses, GrainCorp said, it “continues to engage actively with parties who have expressed an interest in acquiring part or parts of the GrainCorp portfolio.”

Specifically, GrainCorp said it has “engaged extensively” with Long-Term Asset Partners (LTAP), a Sydney-based asset management firm, about a possible takeover, but as of Thursday “has received no recent definitive update from LTAP.”

LTAP was set up in 2016 to pursue “long-term, patient investing in Australian agricultural assets and infrastructure.” In November 2018, by which time it owned a 4.2 per cent stake in GrainCorp, it made a “non-binding indicative proposal” to the grain firm, valued at $2.38 billion. — Glacier FarmMedia Network

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“All indications suggest we’ll see an increase in malt barley, as well as feed,” confirmed Peter Watts of the Canadian Malting Barley Technical Centre.

In light of China’s consummate ban of Canadian canola, some worry other commodities will be treated similarly. However, there aren’t yet any indications that that is the case for malt barley.

According to Statistics Canada, China’s demand for barley and malt is expected to increase steadily due to China’s lower grain production due to urbanization and limited farmland.

“It’s impossible to predict what will happen but there aren’t any indications that Canadian malt barley will be shunned to the same extent as Canadian canola,” he said.

Though China has a history of importing the majority of its barley and malt from Australia, Canadian-grown malt is steadily increasing its market share.

Australia grew 60 per cent of China’s imported barley in 2016, while Canada accounted for 20 per cent. However, given Australia’s inclement weather in recent years, Canada has gained some of the market share in China.

“Australia had a severe drought which curtailed their production significantly,” Watts said. “If they return to normal crop levels they’ll be back competitive on the global market.

“Malt barley production depends heavily on harvest conditions, particularly weather, so we’ll have to wait and see what sort of supplies there are.”

Aside from increased acreage, Watts hopes to see diversity in varieties of malt barley.

“As an industry, we’re looking to transition to new varieties,” said Watts. CDC Copeland and AC Metcalfe have dominated the industry for almost 20 years.

“We expect AC Metcalfe acreage to decline as new varieties increase,” he added.

“We’re looking for these varieties to be produced in more substantial quantities and become a mainstay in commercial systems in Canada and abroad.”

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“The price of feed barley is staying historically high,” said Brian Otto, chair of the Barley Council of Canada, noting feed barley at Lethbridge was currently trading at $5.50 per bushel, which would typically be considered a good price for malting barley.

“With barley prices that high, I think acres will go up,” he said.

Tight supplies worldwide, as Australia had a horrible drought, were contributing to the domestic strength, he said. “It’s just a worldwide shortage of barley, period.”

While increased acres and a resulting boost in production would likely lead to price declines, Otto said the Barley Council was also working on projects to increase demand.

One such project is focused on showing the intrinsic value of higher-protein Canadian feed barley in order to help develop the Chinese market further.

While the current diplomatic dispute between Canada and China is a concern to exporters, “we aren’t seeing anything that shows us that they’d restrict trade on agricultural products at this time,” said Otto.

China is the single largest export customer for Canadian barley, accounting for roughly two-thirds of the 754,900 tonnes exported during the first four months of the 2018-19 crop year, according to the latest monthly data available from the Canadian Grain Commission (CGC).

Total Canadian barley exports to date are running well ahead of the year-ago level, with the weekly CGC report showing total barley exports of 1.118 million tonnes, as of Jan. 13. That’s about 300,000 tonnes ahead of the previous year’s pace.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“I really suspect that anything left in the field now, any barley now, will not be malting quality,” said Jeff Nielsen, a farmer near Olds, Alta., and director with the Alberta Barley Commission.

Nielsen said he managed to get his barley off during a brief harvest window in early September, as many others did. However, he said Wednesday, he had not been able to get into fields since Sept. 10.

Cameron Goff, a farmer near Hanley, Sask., and a director on the Saskatchewan Barley Development Commission, agrees chances are small that any barley left in fields will be good for anything but feed.

However, he said, he still holds out hope that some of the late-seeded barley still standing will be able to meet malting quality specs, provided it wasn’t hit too badly by frost.

Like Nielsen, Goff said he managed to get all of his barley taken off before the heavy precipitation hit.

“It’s a shorter-season crop and if you’re really after malt you do try and get it in because bad weather in September isn’t all that uncommon,” he said. “It can really kick malt barley more than anything else as far as downgrading.”

On the supply side, Nielsen said he thinks maltsters will be able to draw on old crop and that should get them enough to see them through.

He managed to recently sell some of his old-crop barley, he added, and thinks a fair amount of supply is still sitting in bins thanks to a large, high-quality crop last year.

“I think there is a good supply of good quality (old-crop) malt out there.”

Prices for malt barley have ranged between $5.50 and $5.60 per bushel at elevators in his area. Feed barley prices have been around $5.25 per bushel, he said, although by shopping around and calling brokers, farmers might be able to do better than prices posted at local elevators.

Goff, meanwhile, wonders if maltsters might have to stretch a bit to source supplies this winter. He said he agrees last year’s crop will help, but he doesn’t know how many farmers still have some of those stocks left. Many farmers moved old crop when it appeared that another large, good-quality harvest for barley and wheat was imminent.

He said he heard from companies about three weeks ago, looking to buy barley for fall, winter and next summer delivery and that tells him they do not have enough.

“So, I can’t see if they got that many orders on the books, if you will, they were still looking for it two to three weeks ago, I can’t see them getting them filled.”

Prices of about $5.25 per bushel were being offered, he said, but it was when many believed there was not going to be much feed around. The longer that harvest drags on under heavy precipitation, the more that situation will change.

But of five different places around his area, he said $5.25 per bushel was the best offer — $5.40 if he was willing to accept spring delivery.

This year’s long, wet harvest might have come at a bad time, just as export markets were growing. Nielsen said he hoped those buyers would not suddenly be shorted and left to find new suppliers. Foreign buyers may be able to find new opportunities within Canada to fill their needs, he added.

Some higher-protein barley grown in drier areas of the south, which was not suited for malt, may be headed that way. As well, Nielsen said, a lot of other grain, such as wheat, may yet enter the feed market.

Statistics Canada estimated Alberta farmers would grow 4.042 million tonnes of barley in 2018. Saskatchewan farmers were tapped to grow 3.237 million, Manitoba farmers 492,900 and Canadian farmers overall were expected to harvest 8.227 million tonnes this year.

According to the latest crop report, for conditions as of Oct. 2, the Alberta barley crop was 45.7 per cent harvested. That accounts for 82 per cent completed in the south, 41.5 per cent in central regions, 14.4 per cent in the northeast, 17.2 per cent in the northwest and 29.3 per cent in the Peace district.

Saskatchewan’s barley harvest overall was reported as 81 per cent complete in the latest crop report as of Oct. 8; Manitoba’s barley crop was estimated at 97 per cent harvested in the Oct. 9 crop report.

The latest Statistics Canada stocks report, released in September, stated 1.256 million tonnes were still on hand, but it did not break out how much of that was planned for malt.

— Terry Fries writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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“There are painful crop losses in Germany, Poland, Britain and Scandinavia,” one German trader said. “The volume of animal feed barley will be cut and I think there could be an-EU shortage of about 500,000 tonnes of malting barley.”

“But it looks like France will ride to the rescue with an overall good crop,” he said. “Malt may have to be produced using lower-quality winter barley and more EU imports are also likely from South America.”

Germany’s farming association cut its forecast of the country’s 2018 winter barley harvest to 7.3 million tonnes, down 18.8 per cent on 2017, with worries about crop quality after drought.

Poland’s winter barley crop is likely to fall about six per cent on 2017 to around 3.4 million tonnes, said Wojtek Sabaranski of analysts Sparks Polska.

“The market is quite concerned about the size of this year’s malting barley harvest,” Sabaranski said. “Malting barley fields in the central and northern regions of the country are in a very poor shape.”

Many spring barley crops in Britain appear in poor condition following a prolonged period of dryness. Winter barley is less widely grown in Britain.

“Springs (spring barley) are not coping terribly well in quite a lot of the country,” said analyst Peter Collier of Britain’s Agriculture and Horticulture Development Board, adding the picture varies with some crops in reasonable shape.

Quality is also a concern.

“Malting barley is almost at a 50-pound (C$86) premium to feed barley so it is anticipated that (malting) quality is going to be hard to source,” Collier said.

But France’s barley harvest is showing reasonable results so far, which could put France in a strong position if drought in northern Europe slashes malting barley supplies.

“France could fare quite well in this tight context and malting premiums (prices) have potential to rise further,” one French trader said.

France produces a significant amount of malting barley from winter as well as spring varieties.

Winter barley harvesting is almost over in France, with traders assessing average yields and quality.

The farm ministry forecast France’s total barley crop at 12.1 million tonnes, unchanged on 2017.

But some doubt remains, with analysts Strategie Grains cutting its estimate of the French crop to 11.5 million tonnes from 12.1 million, and some traders even estimating 10.5 million to 11 million tonnes.

— Reporting for Reuters by Michael Hogan, Valerie Parent and Nigel Hunt.

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