Australian bulk grain-handling firm GrainCorp plans to buy Canada Malting and its three sister companies in United Malt Holdings (UMH) for just under C$700 million.
The Sydney-based grain handler said Monday it would fund what it calls a “company-transforming acquisition” through a debt facility and a “fully underwritten” equity raising.
The seller, New York-based private equity firm Castle Harlan and its Australian arm, CHAMP Private Equity, has owned Canada Malting, U.S. firm Great Western Malting, Australia’s Barrett Burston Malting (BBM) and a 60 per cent stake in U.K. firm Bairds Malt since September 2006.
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That’s when Castle Harlan, whose other Canadian and U.S. holdings include the Perkins restaurant chain, bought the four maltsters from U.S. agrifood giant ConAgra and South Africa’s Tiger Brands. It bought up the remaining 40 per cent of Bairds Malt in 2007.
Management at GrainCorp and UMH have “identified significant benefits that will result from the combination of these two great businesses,” David Pittaway, senior managing director at Castle Harlan, said in a release Monday, adding that that UMH would bring “important European, North American and Australasian markets and relationships” to GrainCorp.
CHAMP director John Haddock called GrainCorp “a natural owner of UMH’s assets; they are a highly complementary fit.”
Calgary-based Canada Malting’s holdings include malthouses at Calgary, Montreal and Thunder Bay, transloading and container packing operations at Vancouver, Toronto and London, Ont., and warehouses at Vancouver, Toronto, Montreal and Innisfail, Alta. The company supplies brewers across the country.
Canada Malting, whose history dates back to 1902, had been widely held for much of its existence. By the time ConAgra bought control of it in 1995, Canada Malting’s major shareholders had included both the Molson and Labatt brewing firms.
Canada Malting’s sister firm, Great Western Malting, supplies brewers throughout the western U.S. from malt houses at Pocatello, Idaho and Vancouver, Wash.
“Barley procurement”
Combined with its British and Australian partners, UMH operates a total of 14 malthouses and produces about a million tonnes of malt per year, with expansion projects underway to boost production capacity to about 1.2 million tonnes.
“For a number of years GrainCorp has been examining ways of making company earnings more robust and less susceptible to seasonal variation,” GrainCorp chairman Don Taylor said in that company’s release Monday.
“With its Australian and international operations, UMH achieves this goal by increasing and diversifying GrainCorp’s future earnings.”
Buying UMH will also boost the size and scale of GrainCorp’s operations and makes GrainCorp an “international agribusiness,” Taylor said.
“The acquisition will substantially increase the contribution to GrainCorp’s earnings from grain downstream processing. We will also be able to apply our grain sourcing and trading experience to the international barley procurement, storage and logistics functions of UMH.”
GrainCorp said it expects to finalize the deal in late November, pending “relevant regulatory approvals” as well as a successful equity underwriting agreement and “no material adverse effect on UMH’s business” between now and then.
