The competition regulator has barred GrainCorp from selling the Port Kembla bulk liquid storage site as part of its $350 million sale to storage market rival, ANZ Terminals.
While the Australian Competition and Consumer Commission has approved most of the proposed deal, its partial blocking decision will shave $18 million from the price GrainCorp eventually receives.
ANZ, which already owns 12 sites around Australia with 426,000 cubic metres of storage capacity, has also been told it can only complete the buy up if it finds another owner for GrainCorp's site at Osborne/Largs Bay in South Australia.
Additionally, the ACCC insisted ANZ must not expand its Coode Island facilities in Port Melbourne without the competition regulator's approval.
Apart from the Port Kembla terminal which adjoins its big NSW South Coast export grain elevator, GrainCorp owns seven other Australian bulk liquid sites at Pinkenba and Hamilton in Brisbane; Devonport, Tasmania; Port Melbourne and Laverton in Melbourne; North Fremantle in Western Australia and at SA's Largs Bay.
Assuming the $332m sale is now approved by the Foreign Investment Review Board, ANZ expected to take control of the GrainCorp sites next month.
Port Kembla has been good value for us...it will continue to be an important part of GrainCorp's strategy to diversify into non-grain activities
- Mark Palmquist, GrainCorp
GrainCorp chief executive officer, Mark Palmquist, played down any disappointment he may have felt after ACCC's announcement, saying he was pleased with the lengthy ACCC review's final outcome.
Port Kembla had been excluded from the sale to address concerns the ACCC had about potential port-side bulk liquid storage competition in the NSW market.
Kembla's a good business
"The Port Kembla terminal has been good value for us," he said.
"It will continue to be an important part of GrainCorp's grain ports strategy to diversify into non-grain activities.
"It is expected to continue to deliver positive EBITDA results."
He noted Port Kembla was also the only bulk liquid facility co-located at a GrainCorp core grain terminal site, and it was operated by the grain terminal staff.
GrainCorp, which yesterday reported a $113m full-year statutory trading loss largely because of the drought, also owns five New Zealand bulk liquid storage sites.
Its stockfeed and food divisions rely on these to service that market with edible oils and tallow.
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Although profitable and backed by long-term usage contracts, the Australian liquid terminals were identified in last year's portfolio review as valuable assets which could be sold to a specialist operator to release capital for the drought-weathered grain business, or to pass back to shareholders.
When we bought the liquid terminals almost 80 per cent of their business handled product we produced, now 70pc doesn't have anything to do with our industry
- Mark Palmquist
Since bought by GrainCorp as part of the Gardner Smith oilseed processing business eight years ago, the liquid terminals have increased in capacity to handle more industrial storage products, including fuel, lubricants, acids and solvents.
Changed priorities
"It's a very good business and is operating well, but it's not really for us these days," Mr Pamquist said.
"When we bought the liquid terminals almost 80 per cent of their business handled product we produced, but now 70pc of what they store doesn't have anything to do with our industry."
Mr Palmquist said if the ACCC conditions were satisfied or, if applicable, waived, GrainCorp expected the sale to wrap up by December 31.
ANZ Terminals CEO, Nick Moen, said combining the two businesses was an exciting opportunity for his employees, customers and other stakeholders.
"We can enhance our ability to provide value-added solutions and flexibility for our customers across Australia while also capitalising on opportunities to grow our business further."
The ANZ Terminals' purchase requires FIRB approval because it is a wholly-owned subsidiary of Helios Investments, in turn owned by fund manager, Hyperion Investments Australia, whose connections include overseas investors.
ANZ operates largely in the industrial liquid market, storing and handling chemicals, petroleum products, bitumen, marine and aviation fuels, and oils, plus edible oils and fats.
Next, the MaltCo float
Meanwhile, with the sale process now expected to go through, Mr Palmquist said GrainCorp could be more definitive about its plans to spin off GrainCorp's malt division next year.
A scheme booklet would be released in the first quarter of 2020.
"GrainCorp is completing preparations for the proposed demerger of the malt business and will keep shareholders and the market informed in accordance with our continuous disclosure obligations," he said.
Mr Palmquist and chairman, Graham Bradley, will transfer their current roles to the new Australian Securities Exchange-listed MaltCo, however he expected to continue in his current GrainCorp job at least for the first quarter of the new year.
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