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GrainCorp, Cargill to divest Allied Mills joint venture to PEP

FBR Staff Writer Published 31 January 2017

Australian agribusiness firm GrainCorp and Cargill Australia have agreed to divest their respective stakes in the joint venture Allied Mills Australia to funds advised by Pacific Equity Partners (PEP).

In this regard, GrainCorp will sell 60% of its stake in the joint venture for $190m, the remaining stake of 40% will be sold by Cargill Australia.

GrainCorp managing director & CEO Mark Palmquist said: “This transaction is consistent with our strategy to proactively manage our portfolio to improve returns. The interest shown by PEP to acquire full control of Allied Mills provided us with an excellent opportunity to realise the value in Allied and create balance sheet flexibility for the future.”

According to GrainCorp, the enterprise value of Allied Mills is $455m, worked out based on an FY16 average level of working capital and grain inventory/prices.

GrainCorp will also be benefitted with $35m of franking credits from the divestiture which is subject to regulatory approvals.

GrainCorp chief financial officer Alistair Bell said: “Over a number of years GrainCorp has been investing in a series of capital projects and as these projects are completing, our focus has been on maintaining a disciplined approach to capital management and portfolio optimisation.

“This sale of an equity investment in Allied Mills creates an opportunity to realise value, reduce gearing and improve our returns. The funds of $190m will provide flexibility as we approach our peak gearing and remain available for other redeployment opportunities.”

Both Cargill Australia and GrainCorp have been joint investors in Allied Mills for more than 15 years.

GrainCorp’s stake in Allied Mills was purchased from Goodman Fielder in 2002 and has a book value of $178m as on 30 September 2016.

Last month, Archer Daniels Midland (ADM) had announced the sale of its 19.9% ownership stake in GrainCorp for A$387m($286m).