CBH releases structural review options

16 Aug, 2016 11:00 AM
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CBH chairman Wally Newman.
CBH chairman Wally Newman.

CBH has released its long-awaited structural and governance review document that outlines the various options and potential trade-offs in moving away from a non-distributing co-operative to either a non-distributive co-operative or a publicly listed company.

The booklet, released yesterday, details the various benefits and options open to growers, if and how they wish to overhaul CBH's structure.

The "legacy document" follows extensive surveying conducted by CBH in March with 900 growers across 22 grower groups to gauge understanding and appetite for a change to the co-operative's structure.

CBH chairman Wally Newman said the aim of the document was "to provide an unbiased information package" to provoke an informed discussion about what suits CBH now and into the future.

He said this was the first time growers had been actively engaged in discussions to change the 83-year-old co-operative.

"Our growers are in the rare position of being in control of their own supply chain and as the owners of CBH, this process gives them an important opportunity to provide input into how CBH is structured and governed," Mr Newman said.

"We have conducted a very candid review, considering comprehensive grower feedback and advice from independent advisors in financial services, co-operative and corporate governance, legal and tax experts.

"These are very complex topics and growers deserve to have all the information before being asked to provide any feedback on the appropriateness of the current model or if changes are necessary."

While there were many trade-offs that grower members must consider in changing the CBH structure, he said the fundamental trade-off was between ownership and control and how value was generated and returned to growers.

"In regards to equity on the balance sheet, growers have got to weigh up the balance, where the equity is currently held and the benefits they get from that value," he said.

"They need to consider what the value is and where it resides - currently the value is low storage and handling fees, high services and reinvestment into the network.

"To move it on to the balance sheet on the farm, there is a trade-off - you'll lose ownership control and tax exemptions so you need to strike a balance between where you want to be and what it'll cost you to get there."

In answering questions regarding Australian Grains Champion (AGC) and its proposal to commercialise CBH, Mr Newman said the booklet's information was designed to answer questions about CBH's structure, not AGC's proposal.

"If growers understand what we have set out in this booklet, they will be able to make their own assessment of the AGC proposal," he said.

The 62-page booklet includes information on the "building blocks" of the co-operative and include ownership and control, member value and access to equity.

A secondary part to the booklet on CBH governance covers the board size and composition, eligibility requirements for directors and board diversity.

"We will be holding a series of meetings over the next few weeks to further explore these issues with growers and will then conduct a full quantitative survey of growers to seek their preferences in relation to the structure and governance elements discussed in the booklet," Mr Newman said.

The document has already come under fire from AGC, saying it didn't include the proposal to commercialise CBH.

AGC director Brad Jones said CBH was withholding "the one genuine proposal" to publicly list CBH and provide $600 million in cash and shares to growers.

A recent report by financial services firm Patersons Securities has placed a $2.56 billion stock market value on CBH.

"As a result WA grain growers have only a $2 cheque for their longstanding patronage of CBH when under the Australian Grains Champion proposal the average grower would potentially receive $131,000 in cash plus shares valued at $430,000, using the Patersons Securities $2.56 billion valuation of CBH," Mr Jones said.

Mr Jones said while the booklet attempted to explain the difference between the models, it was it was clearly biased towards the co-operative status quo and then a distributing co-operative.

"Farmers are smart business people and they will read the information knowing CBH started with a predetermined outcome and worked backwards from there."

WAFarmers has welcomed the release of the CBH structure and governance review, which presented three structural options and possible governance approaches.

"As Australia's largest co-operative, we are pleased that the CBH board has given their members the opportunity to have input into the structure and governance of the organisation going forward," WAFarmers Grains Council president Duncan Young said.

"By outlining the possible structural and governance options for CBH and presenting thoughtful questions for readers to consider, CBH has given their members the power to determine the future of the organisation based on what they see as the most important key issues.

"WAFarmers Grains Council strongly encourages all growers to read the document carefully to ensure they are in the best position to face future challenges and capitalise on opportunities.

"Furthermore, we hope that the release of this document will inspire growers to become even more involved and engaged in discussions, particularly at grower meetings, the latest of which were published at the end of the document."

The first of the closed grower meetings kick off in Brookton and Esperance on August 29 and finish in Coorow on September 9.

Following the meetings, the board will respond to grower feedback in December and put forward a recommendation to growers in 2017.

Mr Newman said he hoped the booklet was a valuable tool to help growers make an informed decision about CBH's structure.

"A business structure is made up of a number of different building blocks and many of these are connected, where choosing one means you forego another. It's these trade-offs that are critical for growers to understand.

"The review will ensure growers have critical input into the structure and governance of CBH.

"The feedback gathered from the survey will assist the board to make a recommendation next year and seek a grower vote if it's required."

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READER COMMENTS

Paul
16/08/2016 11:33:09 AM, on Farm Weekly

Brad Jones needs to go for a tour around SA and ask some growers over there what they think about the idea of listing CBH.
Harambe
16/08/2016 1:06:26 PM, on Farm Weekly

Paterson's securities value CBH at 2billion dollars, I will be voting yes if something comes up.
central wheatbelt
16/08/2016 1:12:09 PM, on Farm Weekly

A good con job by the CBH board, as good as the con job by the AGC proposal. Document written with end result made up by the board. Lacks detail of each option's worth to the growers bottom line. If I could vote on the AGC proposal today I would vote in favour as I know what value I would be getting.
Genex
16/08/2016 1:30:13 PM, on Farm Weekly

Paul the difference in the AGC proposal is that it is structured for WA growers to remain the majority shareholder, not a wholesale sell off of a monopoly that creates another monopoly. Price gouging will see competition come quickly as WA is a big exporter, like SA is seeing competition now. Remember this a restructure that you will have ownership in if your a WA grower.
Gerry Atric
16/08/2016 2:43:55 PM, on Farm Weekly

Good to see the vocal minority ready to sell out with no regard for past generations, and more importantly the future. Bunch of scabs trying to feather their nest eggs before the retire from farming.
DJ
16/08/2016 3:44:05 PM, on Farm Weekly

Spot on Gerry. I've yet to find a compelling argument in favour of a listing being beneficial for WA growers in the long term.
central wheatbelt
16/08/2016 3:51:05 PM, on Farm Weekly

Gerry Atric, the current generation like myself have retired 2 generations to Perth through farm purchase, house purchase and extra financial help. That is respect for the past generation, like in good succession planning you need to know when to pull the trigger on leaving the farm to the next generation. CBH needs to look at who is still farming and return their true equity back to them.It needs to happen before the overseas farmers are growing the majority of grain in WA. People like you Gerry is why CBH politically is in a mess and in which i have little respect for.
muck jockro
17/08/2016 9:25:10 AM, on Farm Weekly

Gerry you are the scab that wants all the people that have contributed to CBH to leave their contribution to you. You can have your two bucks, I support the AGC proposal so I know I am going to get something.
Confo Carter
17/08/2016 12:59:31 PM, on Farm Weekly

Farmers in WA need to learn to be competitive with the global market. Holding out in hopes of a higher price is madness, especially with wheat prices being at 10 year lows. I agree with Haramae / Harambe
Harambe
17/08/2016 1:08:36 PM, on Farm Weekly

Gerry, you finally made a monkey out of me
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