US co-op joins line of CBH suitors

Brad ThompsonThe West Australian
CBH chairman Wally Newman stands in an oat crop on his farm south-east of Newdegate in September.
Camera IconCBH chairman Wally Newman stands in an oat crop on his farm south-east of Newdegate in September. Credit: Danella Bevis/The West Australian.

America’s biggest co-operative has reached out to Australia’s biggest co-operative in the latest twist in the battle to control the grain supply chain in WA.

CHS Inc has been striving for a significant piece of the Australian industry and is understood to regard CBH as a logical partner or investment vehicle.

CBH chairman Wally Newman confirmed the US farming giant had made contact with the board and its advisers.

The CHS move came after Australian Grains Champion unveiled plans to corporatise CBH and list it on the Australian Securities Exchange. The AGC plan relies on $600 million in debt funds from GrainCorp and First State Super, with growers promised up to $1 billion in cash and shares in the new company.

Other big Australian super funds and infrastructure investors are now taking a closer look at CBH and the opportunity to join a rival consortium.

Industry Funds Management, which led the consortium behind a $5 billion bid for long-term leases over Port Botany and Port Kembla, and the Queensland Investment Corporation are prime candidates.

Mr Newman has said CBH will consider listing on its own terms or forge partnerships with others as it reviews the best operating model to return value to 4145 grower members.

It will also consider staying as non-distributing co-operative with the associated tax-free status, moving to a distributing co-operative and any proposals from rival consortiums as it weighs up the AGC offer.

Late last week, AGC stepped up the pressure on CBH to put its proposal to a grower vote by dropping demands for exclusive dealing and payment of a $16 million break fee.

CHS has long been considered a role model for those within CBH who want it to remain a co-operative but deliver returns to growers beyond loyalty rebates and reinvestment in grain receival, storage and port terminal infrastructure.

The CHS operating model allows it to distribute profits to members while listed on the American stock exchange (NASDAQ). Last month, CHS announced its members would share in a cash distribution of $US519 million in 2016.

CHS, with 1100 co-operative and 50,000 individual members, has distributed $US2.18 billion in cash over the past four years.

“The ability of our owners, who are also our customers, to directly share in the financial success of CHS is a unique benefit of a co-operative business,” CHS chairman and farmer David Bielenberg said.

“This cash return is added value that enables farmers, ranchers and member co-operatives to invest in their futures and in the communities where they live.”

GrainCorp chief executive Mark Palmquist joined less than 18 months ago from CHS where he was chief operating officer in its agriculture arm.

AGC is considering options for later this week if, as expected, CBH refuses to meet its deadline to enter into a process agreement that includes a binding grower vote before October.

The options include getting the numbers to call an emergency general meeting, protests and withdrawing the proposal.

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