Crafty GrainCorp brews malt unit spin-off

GrainCorp shares have jumped in early trade after the bulk grain handler announced plans to demerge its global malting business and list the new company on the ASX.

The spin-off would create MaltCo, a global malting and craft brewing distribution business, while GrainCorp will continue to focus on domestic and international grain handling, storage, trading and processing.

GraincCorp shares were 4.7 per cent higher at $9.74 at 8.05am on Thursday, edging towards last month’s near two-year high of $9.87.

If approved by shareholders, MaltCo will be the world’s fourth-biggest independent maltster with malting houses in the US, Canada, Australia, and the UK, Graincorp told the ASX on Thursday.

The company said the demerger would save New GrainCorp about $20 million a year.

“Our portfolio review made clear that these businesses have different characteristics and would benefit from operating separately,” Graincorp chief executive Mark Palmquist said.

“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.”

On demerger, Mr Palmquist will become managing director and chief executive of MaltCo.

While he will remain GrainCorp chief executive until a deal is completed, Mr Palmquist has resigned as managing director and has stepped down from the GrainCorp board.

Meanwhile, Klaus Pamminger, currently group general manager of grains, has been appointed chief operating officer of GrainCorp and on demerger will succeed Mr Palmquist as chief executive.

GrainCorp is targeting a demerger by the end of 2019, with shareholders to receive MaltCo shares in proportion to their shareholdings in GrainCorp, while also retaining their GrainCorp shares.

The global malting division has been a bright spot for GrainCorp with the craft beer market booming as drought wilts the east coast of Australia, reducing harvest volumes.

Last month, GrainCorp announced it would be selling its Australian bulk liquid terminals business to ANZ Terminals for $350 million as part of its ongoing portfolio review

GrainCorp said it would continue to engage with parties who have expressed an interest in buying part or parts of GrainCorp’s portfolio, including Long-Term Asset Partners, who put in an all-cash $2.38 billion takeover bid in December.

AAP