Australia: GrainCorp shareholders vote in favour of splitting grain business from malting operations

The Kiwi boss who is about to lead newly restructured GrainCorp landed in Australia in the nick of time on Sunday night (March 15), narrowly avoiding 14 days of self-quarantine under the new coronavirus lockdown laws, the North Queensland Register reported.

Robert Spurway, the former chief operating officer at New Zealand dairy giant Fonterra, starts his A$950,000 a year managing director's job next week after GrainCorp shareholders on Monday, March 16 voted 99.5 per cent in favour of splitting the grain business from its global malting operations.

The newly created United Malt Group will list as a separate business on the Australian Securities Exchange on March 24 under the market ticker code UMG.

Current GrainCorp shareholders will be issued with one UMG share for every GNC share they own next Wednesday, March 25, assuming the demerger is approved by the Federal Court this week and the Australian Securities and Investment Commission on March 23.

The 104-year-old GrainCorp will continue to operate its bulk handling sites in Australia and North America, seven seaboard grain terminals, oilseed processing operations in Victoria, plus overseas processing and trading offices from NZ to Singapore, India, China and Eastern Europe.

United Malt will stand alone as the world's fourth largest maltster with a malting and malt product distribution network in North America, Britain and Australia, which represents about 15pc of its business.

Mr Spurway, who made his late night arrival in Sydney just 11 hours before the demerger scheme meeting, told shareholders he was excited about returning to Australia to join "an agribusiness icon".

Having just spent eight years working for Fonterra's 10,000 dairy farmer shareholders he was keen to now meet Australian grain growers, other customers in the sector and staff from across the company's local and overseas network in the next month or two.

While drought had been a significant factor hurting GrainCorp and its growers of late, he said the new slimmed down business had a "solid and conservative" base which would stand it in good stead to grow and respond to a potentially big cropping season in the wake of heartening recent rain.

His career in the food industry supply chain would translate well into this new role with the grains and oilseed storage, logistics, processing and marketing company.

The University of Auckland trained chemical engineer started his career with one of Fonterra's predecessor's, Northland Dairy Company, where he was a site manager for six years before moving to Australia in 1999 with the trans-Tasman food business, Goodman Fielder, where he was a state operations manager.

Between 2008 and 2011 he was chief executive officer of West Australian-based fresh food business Mrs Crocket's Kitchen and leading supplier of fresh packaged salads and produce, Salad Fresh.

He returned to NZ to head Fonterra's South Island operations, moving up to the COO's job in 2014.

"I'm looking forward to the next few weeks and months of meeting people, seeing operations first hand and learning the business," Mr Spurway said.

He replaces Mark Palmquist, who will move with demerged UMG to become its new managing director.

GrainCorp deputy chairman Peter Richards, who takes the top board seat next week, described Mr Spurway as a highly capable with a calibre and management experience which would fit well with the company's new direction.

He said a number of initiatives adopted in the past 18 months would sustain GrainCorp's grain-focused business going forward, not the least being it had crop production insurance contract underpinning its revenue in bad seasons for the next 10 years, including $59m in payments for the 2019-20 season.

The company had low core debt following the sale of most of its bulk liquid terminal business in Australia, it had restructured and invested in its oilseed processing and manufacturing business and it had a valuable investment in Canadian receival sites and a partly constructed port elevator.

Outgoing chairman Graham Bradley assured shareholders GrainCorp remained a large, integrated and diverse agribusiness with customers in 30 countries.

"The board believes the demerger has potential to unlock significant value for shareholders by creating two high quality companies with management teams focused on pursuing independent strategies and growth opportunities," he said.

"Both will have appropriate balance sheets, prudent financial policies and experienced boards and management teams to create future value for their shareholders."

It was unfortunate the full value of United Malt's business had not been fully recognised by investors because it was part of a broader group whose business was affected by the variability of weather and crop cycles.

He said numerous potential alternatives to the demerger were considered, including selling United Malt, but the split had potential to deliver greater value over time.

Responding to a shareholder query about the impact of the current sharemarket slump on GrainCorp and United Malt shares, Mr Bradley said GrainCorp's share price had fallen and risen in recent weeks of volatile trade, but the factors influencing the share price this week would not change after the demerger.

"We can't say what we think the value will be, but we believe the combined value of the two companies shares will be greater in due course after the separation," he said.

"We believe there may be investors who have not previously been attracted to consider the malt business because of GrainCorp's volatility in the past."

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