CBH board rejects AGC’s advances

Following a meeting on Monday, the board announced it opposed "an unsolicited, incomplete and conditional corporatisation proposal that would destroy value for CBH grain grower members and their world-class strategic network".

The co-operative will now embark on a roadshow to meet with growers to discuss CBH's future and strategic direction.

CBH chairman Wally Newman, chief executive officer Andy Crane and Deutsche Bank managing director Tim Longstaff, as a corporate adviser to CBH, highlighted the decision at a press conference on Monday.

Mr Newman said the CBH board had worked with advisers from Deutsche Bank and King and Wood Mallesons in assessing the AGC proposal and determining not to enter into a process agreement, describing it as "blatantly deficient".

He said the AGC proposal lacked transparency, offered no long-term value to WA growers and would deliver a strategic blocking stake in CBH to east coast grain handler and competitor GrainCorp.

"After careful consideration the board has today written to AGC advising that we reject the proposal and will not enter into AGC's Process Agreement," Mr Newman said.

"This unsolicited bid would see WA grain growers lose control of CBH's strategic supply chain and GrainCorp acquire a strategic stake in CBH at a discount rather than a premium.

"The bottom line is the board will not enter into an arrangement that does not recognise the investment of generations of WA farmers.

"This proposal will ultimately result in increased fees and charges for growers and offers no clear plan for the future."

While CBH had rejected the AGC offer, Dr Crane said in recent weeks it had received "several expressions of interest from other parties", but would not elaborate.

"We are a world-class business and these approaches are made from time to time," Dr Crane said.

This comes in the wake of intense industry speculation about rival offers for the business, with reports that leading United States co-operative CHS was interested in the WA grain giant.

Dr Crane said future proposals would be considered on their merit, but confirmed CBH had not entered into discussions with other parties.

"This is a conversation we will have with members in the months ahead," he said.

"These are conversations we have had previously with our members, but we want all growers to raise questions, comments and issues in the coming months."

Starting tomorrow, CBH will hold 20 planned meetings across the Wheatbelt, consulting with growers about future structure and governance and explain its decision.

The meetings will run until mid-April and following these discussions Dr Crane confirmed CBH would produce a proposal for members by September 30.

Mr Newman said the CBH board had provided WA growers with a detailed explanation as to the reasons for its unequivocal decision to reject the proposal.

In summary this explanation portrays that the AGC proposal would:

p Result in loss of grower control over CBH's strategic supply chain;

p Destroy value for CBH grower members;

p Give too much power to GrainCorp;

p Not demonstrate a better alternative strategy for CBH or its network;

p Not deliver the best outcome for grower members.

AGC director Brad Jones said they were disappointed but not surprised with the CBH board decision, but still maintained growers were in favour of voting on the proposal.

"At no stage has the CBH board sought to engage in a discussion about the merits of the proposal and so this was always going to be a disappointing but entirely predictable outcome," Mr Jones said.

"Nonetheless I cannot help but wonder on what basis the non-grower directors, in particular, have satisfied themselves that the board's position is in the best interests of growers.

"Growers are very disappointed that the CBH board is blocking them from seeing a balanced assessment and full details of the proposal.

"At grower meetings in the past few weeks, the overwhelming majority of growers have confirmed they want to see the proposal.

"The response from growers to date has been extremely encouraging and on this basis we will continue to work with the members of CBH to evaluate all options to ensure they, not the board, have the chance to consider the proposal and vote on its merits."

There has been talk that AGC may be able to force an extraordinary general meeting should it get enough CBH shareholder support but AGC officials were tight-lipped, only saying they were considering their options.

Dr Crane does not expect much grower "backlash", believing the co-operative was in touch with what was important to them.

"I think growers get a good say in how their business is run," he said.

"It is important that the board, that is elected by growers, does its duty to assess proposals.

"We have grower-elected directors, an advisory council, grower surveys and we work every day with growers, so I don't think we are out of touch with what is important to growers.

"The board have done their job and if they thought it was good value for growers and it stood up and was a marginal case they may have taken it to growers, but they have made their decision very clear that this is wrong on many grounds and therefore have rejected it."