The board of CBH Group has rejected a bid to list the business on the ASX, believing the GrainCorp-supported float proposal would “destroy value” for its growers and their network.
CBH has been reviewing a proposal from Australian Grains Champion (AGC), which GrainCorp chief executive Mark Palmquist said he supported last month.
The board unanimously voted to reject the proposal this week, saying it lacked transparency, offered no long-term value to WA growers, and – perhaps most worryingly – would deliver “east coast grain handler and competitor GrainCorp” a strategic blocking stake in CBH Group.
“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,” Chairman Wally 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 recognise 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.”
CBH provided its growers with a detailed explanation of its decision.
“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,” the company said in a statement.
Newman said the potential of losing grower control of CBH’s supply chain to market would be a recipe for higher costs, reduced service and lower profits for growers.
“The AGC proposal would result in significant cash leakage from the CBH Group, in turn this would result in less funds being available for ongoing network investment,” he said.
“The GrainCorp-backed proposal offers no long term value, no guarantees and no real future growth for WA grain growers.
“The CBH 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 deficient proposal.”
Newman said the ordeal had led to several inquiries from other interested parties, but said this “only serves to highlight the range of options available for our future structure and for our members.”
He said it was clear growers wanted the opportunity to consider how best to structure CBH for the future.
“In considering the available options on terms most favourable to our growers, our priority will be to retain the competitive advantage of our modern network.”
The board plans to report back on its consultation by September 30.