WAFarmers backs CBH as co-op

WA’s biggest farming body has reaffirmed its tentative support for CBH’s co-operative structure.

WAFarmers’ Grains Council met CBH representatives on Friday to discuss GrainCorp-backed company Australian Grains Champion’s bid to turn CBH into a company listed on the ASX.

With the AGC proposal officially on the table, CBH must give careful consideration to whether it is in the best interests of its 4145 grower members.

Based on a listing value of $3 billion, a grower who delivered an average of 2500 tonnes of grain a year to CBH over the past five years would receive $130,000 in cash and $520,000 in shares under the AGC plan.

The cash component would not change, even if the listed entity’s value varied by a billion dollars either way.

In total, $600 million in cash would go into the pockets of grain growers.

But despite the cash carrot, negative grower sentiment had been growing in the lead-up to the meeting, with many members wary of a move away from a co-operative structure and the likelihood GrainCorp would become the controlling shareholder of the listed company.

An agreement, which AGC is pushing to happen on or before March 18, would in effect bind CBH to the AGC for a period of due diligence and eventual grower vote.

Any attempt to back out before a vote would result in the payment of a $16 million fee from CBH to AGC.

This fee has drawn the ire of the industry, as has the stipulation of a $12m success payment to AGC directors if the proposal is approved by growers with the required 75 per cent of the vote.

After the meeting, WAFarmers Grains Council president Duncan Young said more information was required by growers before a more informed judgment could be made on the AGC proposal.

“WAFarmers Grains Council continues to support the co-operative model for CBH, and will await further information from all parties before commenting on the value or otherwise of the AGC proposal as it is currently presented,” he said.

“Like all WA grain growers, our council has a keen interest in making sure that we fully understand the full range of options and implications of this proposal before deciding whether we feel CBH should sign the process agreement.

“We look forward to the full analysis of the proposal, which is currently being undertaken by the CBH board.”

CBH has committed to explore all co-operative model options as part of an assessment of whether the AGC proposal is in the best interests of its members.

The looming March 18 deadline has forced the board and management of the grower co-operative to reconsider the future of the organisation.

Changes to the legislation governing co-peratives, of which CBH is WA’s largest, has allowed it to consider alternative structural models. The changes in the 2009 Co-operatives Act were included at the request of CBH at the time of passing through Parliament.

One option rumoured to be under consideration is a co-operative capital unit, introduced in Australia to increase the co-operative sector’s flexibility to raise capital.

A big issue for co-ops is the ability to raise capital to fund growth and considerable attention has been given to finding alternative capital sources, and managing and accommodating such financing.

CBH chairman Wally Newman said it was likely the board would respond to its members about the AGC proposal before the March 18 deadline.