Sizeable United Malt Group shareholder and US bank, State Street Corporation, has quit its stake in the Australian maltster as the former GrainCorp subsidiary awaits a potential $1.5 billion takeover by supersized French farmer co-operative, InVivo.
United Malt, the world's fourth largest maltster and ingredients supplier to brewers and distillers in Australia, New Zealand, North America and Europe, is cooling its heels while InVivo's big Malteries Soufflet malt division examines its books.
Malteries Soufflet, which first approached United Malt in December, has made a non-binding and indicative proposal to buy all the local maltster's shares for $5 each, a 45.3 per cent premium on UMG's share price before the offer emerged.
The indicative bid by the French has been viewed by market analysts as an opportunistic move to seize United's strategic production footprint.
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UMG is recovering from significant Canadian drought costs last year and the COVID pandemic's hit to beer sales, and is also selecting a new managing director to replace Mark Palmquist.
The InVivo move, in partnership with US private equity giant, KKR, and France's Credit Agricole bank, has swiftly followed Malteries Soufflet buying Belgian maltster, Castle Malt, last month.
Malteries Soufflet already boasts 11pc of the global malt market, behind market leader, Boortmalt, also owned by a big French farmer co-op, Axereal Group.
United's directors initially batted away confidential indicative offers between $4.15 and $4.90 a share during the past few months, before agreeing it was now in the best interests of shareholders to engage with the persistent suitor and provide due diligence access to its books for up to 10 weeks.
Worth more money
However, while some big shareholders and observers argue InVivo should be offering more than $5 a share, or closer to $2b in total, for such strategic assets, last week State Street Bank confirmed it had been selling down its UMG shareholding since mid January, and particularly since InVivo's ambitions were revealed in late March.
Interestingly, State Street's shares did not sell to InVivo, but to Dutch multinational banking and financial services corporation, ING, and French banking giant, Societe Generale.
United Malt's biggest shareholder is local group, Tanarra Capital, led by prominent investment banker, John Wyley, with a 10.8pc stake, and GrainCorp which retained 8.5pc after floating the malt business as an independent entity in early 2020.
Tanarra noted the replacement of UMG's malting assets and its craft beer and Scottish distillery market networks would be hard to replicate and should be worth more money than the French were talking about.
Other leading United Malt investors include superannuation funds Aware, Australian Retirement Trust, HostPlus and South Australian Superannuation Funds Management Corporation, and the boutique portfolio manager, Ethical Partners Funds Management.
Agribusiness analyst with stockbrokers Morgans, Belinda Moore, said the potential takeover's timing was significant and "clearly opportunistic", given UMG was undervalued and just at the start of what was likely to be a multi-year turnaround in normalised earnings.
Its newly completed Scottish malt plants and improved commercial and pricing arrangements in North America were likely to generate big income increases.
We can't rule out interest from other parties
- Belinda Moore, Morgans
"We think UMG's focus on the higher margin craft beer sector and its warehouse and distribution business to mainly craft brewers ... would be of particular interest to Malteries Soufflet," Ms Moore said.
"We can't rule out interest from other parties, either."
Counter bids may emerge because of UMG's improved earning prospects and the strategic nature of its assets, and the fact it was now the last remaining listed global malt company.
However, Ms Moore said the exclusivity of the Malteries Soufflet data room investigation would make it difficult for others to make a pitch any time soon.
"InVivo group is the logical buyer given it has been acquisitive in this industry and vocal about wanting to be the number one player," she said.
The InVivo co-operative is one of Europe's biggest agribusinesses, evolved from two agricultural produce supply co-ops formed in 1945 which steadily expanded into stockfeed, grain trading, milling, wine, baking and retailing.
French growth agenda
It has only owned Malteries Soufflet for 16 months, having teamed up with KKR to buy the agri-food family business in late 2021.
Regardless of how keen InVivo was to absorb Unitied Malt, Ms Moore said any finalised sale process was unlikely until late this year, or 2024, given it would need antitrust and other regulatory approvals, including consent from Australia's Foreign Investment Review Board.
In Australia, UMG's business is under the Barrett Burston Malting banner and includes malthouses in Brisbane, Geelong in Victoria, and Welshpool in Western Australia.
United has 12 processing plants globally and a footprint spanning New Zealand's Cryer Malt, Canada Malting, Great Western Malting in the US, and Bairds Malt in Britain.
Australia's other major maltster, Joe White Maltings, which was part of Cargill for six years, was sold to Boortmalt in late 2019, while another French co-operative Malteurop, also has a malt house Geelong.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
