WA grain marketer Plum Grove has secured a major coup, signing a new deal that will see it partner with one of the world’s biggest flour milling companies and another large multi-national company regarded as Australia’s biggest export wheat consumer.
The deal will see Plum Grove retain a majority 50 per cent shareholding while bringing on board the US-based Seaboard Corporation and the Salim Group as its new equity partners.
The two companies will each have a 25pc equity shareholding in Plum Grove.
Plum Grove Director Tony Smith said the move would bring WA graingrowers closer to end market users.
Mr Smith declined to reveal the deal’s cash value saying it was confidential but it’s understood his company is valued at $8 million to $10 million.
He said there were no other parts to the deal including prescribed grain volumes.
Mr Smith said a major benefit of the deal would be the forging of stronger links between Australian growers and potential new grain markets in Africa.
He said both companies wanted to establish closer links with WA growers and needed a service provider with the capacity to facilitate stronger relationships.
Mr Smith said new products would be developed over the next couple of years to reflect that approach.
He said potential new grain markets supplying Seaboard’s flour mills in Africa would also be assisted by WA’s logistical advantage to that region.
A WA-based entity, Plum Grove has forged a strong reputation operating managed grain pools in the local market and is an accredited wheat exporter under the Wheat Exports Australia licensing scheme, which oversees the deregulated Australian wheat export market.
The company started in 2004 and has grown steadily to become a key player on the WA grains scene.
It has returned the third best accumulation performance in WA for each of the past three harvests behind traditional major grain players CBH and AWB; taking an estimated 1.2 million tonnes each season.
Plum Grove is also regarded as a trendsetter in pool management transparency and recently secured a long-term service agreement with a newly formed growers co-operative AGG in South Australia.
The Salim Group is considered Indonesia's biggest conglomerate with massive assets including Indofood Sukses Makmur, the world's largest instant noodle producer and the Bogasari Flour Mills.
The Seaboard Corporation has major commodity trading and milling interests, including 25 milling facilities for flour, feed and maize in South America, Africa and the Caribbean.
It also has seven trading offices in those countries and Europe and manages its own bulk freight and chartered vessel fleets to provide logistics control over the delivery of commodities in-house and to third-party customers.
Seaboard directly or indirectly employs more than 14,000 people worldwide and was named at number 552 on the 2010 Fortune 1000 list with annual net sales of approximately $US3.6 billion.
Its shares are traded on the New York Stock Exchange and it has an estimated market capitalisation of $US2.17b.
The company has a long history of agricultural related acquisitions; acquiring its first flour mill in Atchison, Kansas in 1918.
Mr Smith said he was pleased by the new deal and to have a higher level of grain consumption “on board”.
In a statement issued yesterday announcing the deal, Plum Grove Executive Chairman Andrew Young said the new partnership would create a two-fold benefit for Australian growers.
Mr Young said firstly it would open more direct channels between Australian growers and one of the most significant end users of their product.
Secondly, he said it would open the door for Australian wheat to enter previously uncharted markets throughout Africa.
“Both Seaboard and the Salim Group see the investment in Plum Grove as an opportunity to participate in an alternative model that promotes transparent contact between customers and growers.” he said.
“Unlike recent major transactions involving multi-national entities in the Australian grains industry, this partnership involves consumers who have significant processing exposure seeking to form a direct relationship with growers.”
Mr Young said the transaction considerably strengthens Plum Grove’s balance sheet and provides for scope to grow the business.
“Importantly from our grower’s perspective nothing will change,” he said.
Growers will continue to have access to some of Australia’s best pool managers, and fixed price accumulators with an expanded suite of products and services.”
