GRAINCORP'S takeover of AWB Limited is virtually assured.
But any deal will likely see GrainCorp forced to sell AWB's half share in the Melbourne port terminal and storage sites.
- READ MORE TOMORROW
- Grain & Hay News: ACCC port sale likely - traders
- Opinion: Ports hurdle to merger deal
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Speculation of counter bids for AWB from other grain traders appears to have floundered, although an industry source told The Weekly Times a US hedge fund was rumoured to be interested in the former monopoly wheat exporter.
Despite speculation, Canadian grain company Viterra will not put in a counter bid for AWB.
The heads of both GrainCorp and AWB last Friday announced the businesses would "merge" in a deal which valued AWB at slightly more than $800 million.
AWB chairman Peter Polson said the deal with GrainCorp was a "superior option" to setting up a grain trading joint venture with US agribusiness Gavilon.
"This is a very exciting day for our two companies (AWB and GrainCorp)," Mr Polson said.
GrainCorp chairman Don Taylor said the deal provided growth and value at relatively low risk.
The friendly takeover, which, if approved by AWB shareholders and the Australian Competition and Consumer Commission, would result in a company capitalised at $2 billion with an annual turnover of $7 billion.
The Weekly Times understands other companies, including Swiss conglomerate Glencore, were still bidding for AWB as late as Friday.
It is not clear whether Gavilon was still in the bidding as of last Friday, after spending months doing its due diligence of AWB's accounts.
Viterra president and chief executive Mayo Schmidt yesterday said the his company was focusing on integrating its $1.6 billion takeover of ABB Grain Ltd and was more interested in maintaining its earnings and share price.
"Our focus is entirely on South Australia and integrating that business," Mr Schmidt said.
He would not comment on whether Viterra was interested in a rural services division, such as Landmark or Elders, to add to its existing small operation in South Australia.
Mr Schmidt also would not confirm whether Viterra had been discussing a merger with AWB during the past month.
Mr Taylor said the GrainCorp-AWB deal would see $40 million in efficiencies.
These include redundancies of senior management and staff in regional areas where overlap occurs between existing AWB and GrainCorp businesses.
A bidding war would start among a number of grain exporters if the ACCC required GrainCorp to sell off AWB's GrainFlow storages and its stake in the Melbourne grain terminal.
It is expected a number of grain exporters would bid for the half share in the Melbourne port terminal following difficulties with existing shipping arrangements.
"Everyone will be making bids," a grain industry source said.
The takeover will see the new combined business trade as GrainCorp, with the head office located in Sydney.
Melbourne will remain Landmark's head office.
AWB shareholders will receive one GrainCorp share for every 5.75 AWB shares.
Existing GrainCorp shareholders will hold 58 per cent and AWB shareholders 42 per cent of the combined company.
Newly appointed GrainCorp managing director Alison Watkins will be the executive head of the company, while AWB managing director Gordon Davis is to be paid out for the remainder of his five-year contract, which is due to expire in September next year.
The new board will comprise Ms Watkins and the four AWB non-executive directors and six from GrainCorp, with Mr Polson becoming new GrainCorp chairman and Mr Taylor deputy chairman.
AWB shareholders will receive documentation on a scheme of arrangement, which explains the deal, in September.
This documentation will contain a recommendation by AWB's board to accept the proposal in the absence of another offer, plus an independent expert's report.
A scheme meeting will be held after September for AWB shareholders to vote on the proposal.
The vote will also include a resolution to remove the 10 per cent shareholder cap, which was introduced when the company restructured in September, 2008, to prevent takeovers.
GrainCorp shareholders are not required to vote on the takeover proposal.
If AWB shareholders approve the proposal, an order will be sought from the Supreme Court binding the two companies to implement the scheme of arrangement.
The two companies will then begin operating as a single entity.
MONOPOLY OR THE WAY FORWARD?
- Russell Amery, VFF Grains Group president
"It is too early to call at the moment. There are positives and negatives to the situation. The positive is that we have two Australian companies merging together. The negatives of it will be their establishment as a large monopoly."
- Mark Hoskinson, NSW Farmers Association grains committee
"We need to put the brakes on this until we can get clear assurances. It is like letting Coles and Woolworths amalgamate. The big threat is what steps are in place to stop this company from being taken over by a foreign company"
- Ian McClelland, Birchip Cropping Group president
"I think it is a very good move. Both companies have had their ups and downs and they might now have strength in numbers. I am pleased as a shareholder they have done it."
- Stuart King, Ultima grower, northern Victoria
"I think it is a good way forward. Given the chequered past they have had, it will be interesting. I think for the industry as a whole, with the deregulation process, mergers were inevitable. It means Australia can be more competitive."
- Neil Simpson, Berriwillock grain grower, northern Victoria
"For the employees it will be a worrying time and that local competition that was occurring will no longer be a benefit for the growers but there is more positive than negative. We have two companies which have been on the market for years, who have come together.'
