CBH board rejects AGC bid

CBH chairman Wally Newman said the board believed the proposal would destroy value for CBH grower members and would give a blocking stake to one of CBH’s key competitors in GrainCorp.

However, the decisions does not necessarily spell the end of the matter, with AGC having the option to try and force an extraordinary general meeting (EGM).

The board decision comes in the wake of intense industry speculation about rival offers for the business, with reports that leading American co-operative CHS was interested in the Western Australian giant.

Chief executive at CBH, Andy Crane, would not be drawn on specifics of other deals, only saying it was not unusual for CBH to receive offers.

“We are a world class business and these approaches are made from time to time.”

He said any further proposals would be considered on their merits.

For its part, AGC officials expressed disappointment in the decision, claiming CBH had acted as a censor to its members, but said they were not surprised.

"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, said AGC director Brad Jones.

He said now CBH had made its decision not to release the plan to growers, AGC would work on a series of consultation meetings with farmers to discuss the proposal and its benefits

“AGC has spent the past few weeks on the road, meeting with hundreds of growers. It is clear from these meetings that support for our proposal grows by the day,” he said.

GrainCorp declined to comment on the board decision.

AGC may still be able to force an EGM on the proposal should it get enough support from CBH shareholders.

Officials at AGC were tight lipped about embarking on this path of action, saying only they were considering their options.

Both the CBH board and AGC are claiming they have grower backing for their stances.

Mr Newman said growers wanted to retain the co-operative structure of the business.

He said losing grower control of CBH’s supply chain to market would be a recipe for higher costs, reduced service and lower profits for growers.

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

Mr Newman said the CBH board had worked with advisors from Deutsche Bank and King & Wood Mallesons in assessing the AGC proposal and determining not to enter into a process agreement.

Dr Crane announced CBH would embark on a consultation process with growers to consider structure and governance.

CBH will conduct more than 20 meetings with growers in the next six weeks to start this process.

Dr Crane defended the board’s decision not to allow growers to make their own decision on the AGC proposal.

“We have nine grower directors, and we are never far away from what is important to our grower members.”

“In this case, we think the board has done its duty and found this proposal offers no value.”

WAFarmers applauded the decision of the CBH board.

WAFarmers grains council president Duncan Young said the council appreciated the concerns raised by CBH Board during the due diligence process.

“A number of the concerns highlighted by CBH were the same as those of the Grains Council, which were raised when we met with both CBH and AGC at our last Grains Council meeting,” Mr Young said.

But fellow WA farmer organisation the Pastoralists and Graziers Association (PGA), which has a strong free market philosophy said the decision was wrong and that farmer members should be given an opportunity to decide for themselves.