GrainCorp to Go for UMH Buy

Submitted by Jim Thesiger on 6 October, 2009 - 13:19

GrainCorp (GNC), a company that mainly focuses on services related to the grain industry is planning to purchase the fourth biggest commercial malt producer of the world- United Malt Holdings for $757 million. According to the company authority, the “big buy” will help GrainCorp to become a global business organisation with operations in Australia, US, Canada and UK. GrainCorp stock trading was halted earlier today pending the declaration of the agreement and a related capital raising. It is to be mentioned that United Malt Holdings is a major malt producer which is globally known for its operations that supplies malt for the production of beer and whisky to a number of the world’s leading brewers and distillers. The company runs 14 malt houses and generates around 1 million metric tonnes of malt annually. The company has future plans to boost up its malt production to 1.2 million metric tonnes.

In a statement, GrainCorp chairman Don Taylor mentioned that the company was examining different ways to make its earnings more robust and less vulnerable to seasonal variation. The acquisition of UMH will help the company to go global to diversify its future earnings. GrainCorp will enjoy a stronger business and reduced seasonal volatility of its earning through the deal which will support the company’s strategic objective of persistent and lucrative long term growth, he added.

The UMH acquisition is to be funded through a mix of debt and equity. GrainCorp has plans for a $100 million placement of shares to institutions and a nine-for-10 entitlement offer to institutions and retail investors to heave $489 million. The entitlement offer includes an offer worth of $220 million to the institutes and a $269 million worth of offer to the retail investors. Both share offers are entirely underwritten by Credit Suisse. GrainCorp also has plans to for a new $100 million debt facility. The company declared a 15 cents dividend for the fiscal year that will end at September 30.