GrainCorp’s plans to demerge its global malting business and list the new company on the ASX have been greeted warmly by investors.
The spin-off would create MaltCo, a global malting and craft brewing distribution business, while GrainCorp will continue to focus on domestic and international grain handling, storage, trading and processing.
GrainCorp’s malt business has grown to represent nearly 60 per cent of the company’s annual earnings since its acquisition in 2009, underpinned by the doubling of craft beer’s share of the United States beer market in the past five years.
If approved by shareholders, MaltCo would be the world’s fourth largest independent maltster, with malting houses in the US, Canada, Australia, and the United Kingdom, GrainCorp said.
The company told the ASX on Thursday the demerger would save the new GrainCorp about $20million a year.
‘‘Our portfolio review made clear that these businesses have different characteristics and would benefit from operating separately,’’ GrainCorp chief executive Mark Palmquist said.
‘‘A demerger would provide both MaltCo and new GrainCorp with increased flexibility to implement independent operating strategies and capital structures and allow them to attract investors with different investment priorities.’’
GrainCorp shares rose by nearly five per cent at the open on Thursday before cooling slightly to sit 3.71 per cent higher at $9.645 at noon (AEDT).
The price was still below the $10.42 per share takeover offer proposed by Long-Term Asset Partners in December.
On demerger, Mr Palmquist will become managing director and chief executive officer of MaltCo.
While he will remain GrainCorp chief executive officer until a deal is completed, Mr Palmquist has resigned as managing director and has stepped down from the GrainCorp board.
Klaus Pamminger, currently group general manager of grains, has been appointed chief operating officer of GrainCorp and on demerger will succeed Mr Palmquist as chief executive officer.
GrainCorp said it was targeting a demerger by the end of the 2019 calendar year, with shareholders to receive MaltCo shares in proportion to their shareholdings in GrainCorp, while also retaining their GrainCorp shares.
The global malting division has been a bright spot for GrainCorp with the craft beer market booming as drought wilts the east coast of Australia, reducing harvest volumes.
Last month, GrainCorp announced it would be selling its Australian bulk liquid terminals business to ANZ Terminals for $350million as part of its ongoing portfolio review.
GrainCorp also said it would continue to engage with parties who had expressed an interest in buying part or parts of GrainCorp’s portfolio, including LTAP’s all-cash $2.38billion offer.