CBH no closer to signing AGC deal

04 Mar, 2016 01:00 AM
Australian Grains Champion director and Tammin grower Brad Jones has hit back at criticism over an exit and success fee stipulated in the AGC proposal to corporatise CBH indicating they're standard practices.
Australian Grains Champion director and Tammin grower Brad Jones has hit back at criticism over an exit and success fee stipulated in the AGC proposal to corporatise CBH indicating they're standard practices.

CBH and Australian Grains Champions (AGC) are stuck in a stalemate with the co-operative seeking more information and AGC witholding until a commitment is made.

The standoff occurred late last week after CBH chairman Wally Newman came out firing at the co-operative's annual general meeting (AGM) on Wednesday, February 24.

AGC is now demanding the CBH board allow grower shareholders the right to decide their future without being blocked.

On Wednesday, CBH barred media from the question and answer period of their AGM "out of respect for growers" before having CBH chairman Wally Newman, chief executive officer Andy Crane and Deutsche Bank managing director Tim Longstaff as a corporate adviser to CBH, provide comment.

Mr Newman revealed CBH had responded to the AGC proposal handed to him the previous week with a series of requests for further information relating to network re-shaping, caps on long-term storage and an indicative view of value of the co-operative and its shares.

"The board has worked with external advisers and CBH's senior management team over the last week to assess the proposal," Mr Newman said.

"We are clear about our obligation to growers and believe it's fair and reasonable to request this information so that we can continue to assess whether this proposal is in the best interest of WA grain growers."

Mr Newman said the AGC plan was lacking in detail.

AGC hit back strongly with director Clancy Michael highlighting to CBH that the initial stages of the process did not allow for expansion on further details until CBH committed to signing the Process Agreement.

This agreement, which AGC is pushing to occur on or before March 18, would effectively 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 since drawn the ire of the industry, as has the stipulation of a $12m success payment to AGC directors if the proposal is voted in by growers with the required 75 per cent in the affirmative.

"Our growers would never agree to auction off their family farms without setting a reserve price and understanding all the conditions of the sale," Mr Newman said.

"Similarly on behalf of growers, the board requires AGC to provide the necessary information to make this fundamental benchmarking decision."

The AGC proposal would list the commercial version of CBH on the ASX and would consequently provide CBH members with up to $1 billion cash through two tranches of a guaranteed $600m of cash, a further $400m at the time of listing on the ASX and tradeable shares.

If CBH members ultimately support the AGC proposal, CBH shareholders would exchange their shares in CBH for a cash payment of $600m and shares in AGC.

AGC will then list on the ASX, with timing subject to regulatory approvals and market conditions.

The initial $600m cash payment to growers is being funded by key cornerstone investors, GrainCorp and Morrison & Co, managing capital on behalf of underlying Australian superannuation investors.

Mr Michael said this was not a decision for the CBH board to seek further details, but rather growers.

"WA grain growers are smart businesspeople," he said.

"They are running sophisticated enterprises and the overwhelming feedback is they want to see the proposal in full, assess its merits and vote on it, and they are highly capable of doing that.

"Our proposal is simple and compelling.

"Since the CBH board is not being asked to make a recommendation on it they should allow AGC to progress our proposal to a point where growers can have their say."

Mr Michael said signing the Process Agreement with AGC did not commit the board to agreeing to the proposal, but it would result in the further information it was requesting being made available for all WA shareholders.

"The board should not delay in signing the agreement by March 18," he said.

"Growers must be given the opportunity to have their say on this real, compelling and fully funded proposal that puts valuable shares and cash on their balance sheets."

However, Mr Newman said the $16m break fee was a significant factor in CBH taking any further action with the Process Agreement.

"The implications of signing that agreement are fairly complex, if you change your mind there's a break fee of $16m which is very concerning and we need to be able to give growers a really good understanding of what they're committing themselves to if they go down this path," he said.

"What we don't want to do is rush in and sign something without fully understanding the consequences of that action and the ramifications down the track, if there is any."

AGC director Brad Johns said the break fee was a standard part of any negotiation which protected a party such as AGC "given the significant investment we will be making in due diligence and collating the in-depth information required for a Scheme of Arrangement".

"The quantum of the break fee proposed is similar to other recent transactions, and no fee is payable if the proposal proceeds to a vote - even if that vote is "no"," he said.

"The fee is only payable if CBH breach terms of the agreement or decide to withdraw from proceeding to a vote.

"Often this is because a superior offer has been received by CBH.

"If a superior offer is received it is a fantastic outcome for growers and AGC has helped growers achieve something that they would not have otherwise seen."

CBH has now indicated it will assess the proposal in the best interests of WA grower members with the information it has been provided so far.

In a statement it said "this Process Agreement is onerous and may have serious implications for grower members".

Date: Newest first | Oldest first


unlock CBH
7/03/2016 1:44:22 PM, on Farm Weekly

Wally Newman does not want to rush in until he knows the consequences. Geez CBH are hypocrites, they rush in all the time, especially when the decision is likely to be popular and even if its uneconomic. The biggest gaffe was the purchase of 170 million dollars worth of rolling stock before they had a long-term rail access agreement. They wont sign the process agreement because they are worried more than 50% of growers will take their equity. And then folks it would only a matter of time...
8/03/2016 6:03:33 AM, on Farm Weekly

Growers fail to understand the amount of money CBH is spending to avoid this proposal getting to a vote. They have hired Deutschebank who will now get a substantial multimillion dollar fee if they successfully push the politics towards avoiding a vote. They have also hired a corporate relations firm on top of the in house capacity they have to promulgate propaganda and strategy to keep shareholders fleeced and seemingly happy to pay the highest storage & handling fees of all the major exporting regions of the world. Shareholders need to look past the scare and analyse the offer on its merits
drowning in debt
8/03/2016 6:06:55 AM, on Farm Weekly

how much money are cbh spending when all they have to do is put it to a vote for no cost even if the no vote gets through??? why go to so much effort to prevent a vote from happening?? what are these ego maniac directors scared of??? losing their job??? i think they are worried about agc actually getting to look at the books because they are getting cooked with cross subsidy stew
bird in the hand
8/03/2016 6:11:02 AM, on Farm Weekly

Read with interest speculation on potential takeover suitors. This is standard garbage that appears when the target does not want an offer to be accepted from another entity. It seats doubt in the mind of a shareholder that they might get more for their share. Think about it. Would any Chinese firm engage in takeover speculation when they know the FIRB wouldn't allow them the light of day? Looks like the corporate affairs firms are earning their dollars. Sneaky sneaky and not cheap these days.
beacon boy
8/03/2016 6:36:41 AM, on Farm Weekly

heres an example of the money these corporate affairs turkeys walk away with when they muckrake .. Deutsche Bank AG will receive at least $6-million and possibly as much as $11.5-million if Stelco Inc. accepts another bid instead of the German bank's $900-million offer to raise new money for the legally insolvent steel maker. http://www.theglobeandmail.com/re port-on-business/deutsche-bank-br eak-fee-angers-stelco-investors/a rticle18277354/


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