GrainCorp and Cargill Australia have agreed to sell their respective interests in the jointly owned Allied Mills business to Pacific Equity Partners (PEP) for a consideration of $190 million (pre-tax and transaction costs).
GrainCorp Managing Director and CEO Mark Palmquist said the transaction was consistent with the company’s strategy to improve returns.
“The interest shown by PEP to acquire full control of Allied Mills provided us with an excellent opportunity to realise the value in Allied and create balance sheet flexibility for the future,” Mr Palmquist said.
GrainCorp’s interest in Allied Mills (60%) was acquired from Goodman Fielder in 2002 and has a book value at 30 September 2016 of $178.
“Along with Cargill Australia, we have been joint investors in Allied Mills for over 15 years. We would like to thank the management and employees of Allied Mills for our successful relationship over such a long period,” he concluded.
Group Chief Financial Officer Alistair Bell said the proceeds of the sale will provide balance sheet flexibility and will remain available “for other redeployment opportunities.”
“Over a number of years GrainCorp has been investing in a series of capital projects and as these projects are competing, our focus has been on maintaining a disciplined approach to capital management and portfolio optimisation,” he continued.
“The sale of an equity investment in Allied Mills creates an opportunity to realise value, reduce gearing and improve our returns.”
Allied Mills is one of Australia’s largest manufacturers and distributor of bakery premixes, flour and semi-finished products.
The company has more than 600 employees across Australia and operates from a national network of seven flour mills located in Queensland, NSW, Victoria, South Australia and Western Australia, a bakery pre-mix plant (Kingsgrove, NSW) and a network of distribution warehouses.
In December 2008, Allied Mills also commissioned a new $97 million flour and maize mill at Picton, southwest of Sydney.
The sale, which also includes the benefit of $35 million in franking credits being distributed to GrainCorp, is subject usual regulatory approvals.
