Australia: GrainCorp’s malt spin-off stirrs up new interest

When GrainCorp’s malt division will be split off from its mother company in late March or early April, it will reclaim its old name “United Malt”. United Malt Holdings (UMH) was already the name of 14 maltings in the United States, Canada, UK and Australia which were bought and bundled under one roof by private equity businesses Champ and Castle Harlan. In 2009the group was sold for AUD 757 million to GrainCorp, one of Australia’s leading grain handlers.

Now, more than 10 years later an independent expert's review by Grant Samuel and Associates has concluded the planned demerger of the international malt business, as initially announced in April last year (, 4.4.2019) was in the best interests of GrainCorp shareholders. “The board believes the demerger has potential to unlock significant value for shareholders by creating two high quality, ASX-listed agribusinesses,” stated Graham Bradley, chairman of GrainCorp. After the demerger, Bradley will become United Malt's new chairman while his former position in GrainCorp will be taken up by fellow director Peter Richards.

Mark Palmquist, CEO of GrainCorp, will also depart the company in March to be assigned the role as new managing director of United Malt, which he will pursue from the United States. Former Fonterra executive, Robert Spurway will replace Palmquist in GrainCorp after his departure.

Palmquist explained he was “excited by the opportunity to pursue an independent growth strategy for the malt business” free from constraints of GrainCorp which can continue to be “a leading integrated Australian agribusiness with diversified operations connecting growers to domestic and international consumers in more than 30 countries.”

Palmquist also said that the planned spin-off has stirred up new interest especially in the strongly performing malt business as a possible take-over target. Private equity companies BGH Capital, The Carlyle Group and Kohlberg Kravis Roberts were already named before as interested parties without any official confirmation so far. "We're getting interested input from across the industry, including malt companies," Palmquist said. "It could potentially be a merger or partnership or other business options," he said.

Palmquist also said that he expects a lot of shareholder questions at GrainCorp’s annual general meeting in Sydney on February 19. However, a special shareholder meeting to vote on the demerger proposal is set for March 16.

According to the plans, United Malt will be listed as an independent company on the Australian Securities Exchange with GrainCorp retaining a 10 per cent stake in United Malt. Current shareholders of GrainCorp will keep their shares and receive in addition one United Malt share for each GrainCorp share they own.

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