Giant European agricultural co-operative, InVivo, is poised to become the world's biggest maltster after confirming it is ready to pay about $1.5 billion for Australia's United Malt Group.
United, with 11 processing plants and about 13 million tonnes of capacity, will recommend shareholders accept the $5 a share offer from InVivo's Malteries Soufflet.
The offer is well above the first indicative price around $4.15/share pitched quietly by the French early this year, and about 45 per cent higher than United's share price when the bid intentions eventually became public in late March.
However, the share price has been higher, notably soon after the former GrainCorp subsidiary was listed as a standalone company in early 2020.
United is the world's fourth biggest malt producer, while Malteries Soufflet has expanded rapidly of late into the number two spot, with 28 malt sites.
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The Australian beer and whisky ingredient producer trades locally as Barrett Burston Malting with malthouses in Brisbane, Geelong in Victoria, and Welshpool in Western Australia.
It also has Cryer Malt distribution centres in Australia and New Zealand, plus 13 distribution sites and five malt plants in North America, and three UK malthouses.
The takeover is the latest in a run of European raids on Australian barley malting operations and, if it goes to plan, will leave just one locally-owned producer, the Adelaide-based Coopers Brewery.
After conducting three months of due diligence investigations into United's accounts, Malteries Soufflet will now need Foreign Investment Review Board and Australian Competition and Consumer Commission approval as well as regulatory ticks from governments in Europe, Canada, the US and Britain.
Importantly, the takeover also needs at least 75pc of votes cast by at least 50pc of United Malt Group shareholders at a special general meeting, at a time still to be set so a scheme of arrangement deal can occur.
Board support
United's board of directors has unanimously recommended shareholders support the scheme of arrangement, but also left the door open to superior counter offers, and has sought an independent expert's report to ensure the deal is in the best interests of investors.
An eventual change of ownership for Barrett Burston and its sibling businesses may take at least six months to go through.
Chairman, Graham Bradley, said his board believed the takeover offer appropriately reflected the value of United Malt's assets and their anticipated improvement in near term earnings.
Malteries Soufflet's global managers have apparently seen cost saving opportunities in merging with the Australian business and overlooked United's recent $14m loss for the first half of first half of 2022-23.
Managing director, Mark Palmquist, said Malteries Soufflet's operations in Europe, Latin America, Asia and Africa would strongly complement United's business footprint.
He said the combined strengths of both businesses and larger platform would further capitalise on the sort of key growth opportunities which United had been working towards since its demerger from GrainCorp.
Unfortunately, for the newly-listed maltster, drought in North America and the logistical challenges and sales setbacks caused by the COVID pandemic have undermined the company's momentum since its split from GrainCorp.
Star performer
Prior to the demerger the malt division had been a star performer for the big eastern Australian grain business, generating the bulk of its revenue during recent tough drought conditions in NSW and Queensland.
United Malt shares this week rallied to three-year highs around $4.75 after InVivo malt business confirmed its move - although they still remained about 25c/share below the takeover offer price.
Chairman, Mr Bradley said United's employees, customers and suppliers would be kept fully briefed to ensure their interests were appropriately taken into account during the takeover process.
United Malt has about 1000 staff.
Although Mr Palmquist has reportedly stated he has no knowledge of likely job cuts under a new owner, other observers believe InVivo's private equity partner in the deal, KKR, will expect operating efficiencies such as payroll savings.
Mr Palmquist has noted, however, United operated in localities where Malteries Soufflet was not active, including Australia, which would effectively limit those synergy options.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
