Cargill wins AWB battle

One of the world’s biggest grain players has snapped up the prized spoil of Australia’s deregulated wheat market.

US private company Cargill out bid several domestic and international grain traders to secure the former monopoly wheat exporter AWB for around $870 million.

The deal, likely to make Cargill Australia’s biggest grain exporter, comes just weeks after Canadian agribusiness Agrium finalised its $1.2 billion takeover of AWB.

Reports suggested CBH was among those vying for the cross country reach, including GrainFlow’s 22 grain elevators, AWB’s rolling stock on the east coast and a share in Port Melbourne, that Cargill has now secured.

Cargill Australia general manager Robert Green said the deal also included AWB Geneva and some representative offices around the globe, AWB’s 8 per cent interest in Shenzen in China and the AWB pools as part of the commodity management business.

It also includes the AWB brand but not the 5 Star Flour Mill in Egypt.

“The first step for us is to aim for completion (of the deal) in the early part of 2011 and then integrate the two businesses together so that will probably take up a lot of time and energy in the short term, ” he said.

Mr Green said it was too early to say whether Cargill would invest in storage and handling in WA, but the deal would give it a better reach in the WA market.

“WA is certainly a critical market for us, ” he said.

“Ninety-five per cent of the wheat produced in WA in a normal year goes to export, so it makes it a critical location for us to be originating grain for the export market.

“We have quite a small team originating grain from farmers in WA, so that is something we want to build on.”

Mr Green said there were three staff in WA as part of the Cargill AGA team.

With the ink barely dry on the deal, he said that it was not known if there would be staff cuts, but nation-wide the AWB team was about 200-strong, plus casuals.

“The thing about this acquisition, if you look at it on an Australian basis, there are really three key areas that attracted us, ” Mr Green said.

“One was the ability to be able to touch a greater number of farmers and roll out our risk management solutions to the farmers, the second was a combination of the freight side of it and the third the marketing access of the combined teams of Cargill which is represented in 66 countries around the globe and the AWB team.

“Put that together and you really have an effective vehicle to touch a lot of customers in the global wheat market.”

Not only has Cargill now got its hands on the former monopoly wheat exporter, but it has done so without taking on any liability that may result from any actions related to the Oil-for-Food scandal that started the ball rolling for deregulation.

Mr Green said any issues that may exist around the Oil-For-Food scandal were remaining with Agrium.

The deal is subject to regulatory approval.