Summary
Bunge Ltd , Archer Daniels Midland, Cargill, Nobel Group , Louis Dreyfus, Glencore International and even Gavilon LLC could be interested or already in talks with AWB for a possible acquisition of more then just their Geneva grain trading operations. It would seem logical that someone might be interested in these assets, but who would it be?
Analysis
The Australian grain industry might really be getting hot as the not only does the temperatures are warming up. All the major international grain trading and processing companies are mentioned in this article as potentially being interested in acquiring or partnering with AWB. Viterra, which just acquired ABB the other large chunk of what used to be the Australian grain boards, is the only company not given odds on making a deal. Viteera is probably not interested at this time as they first need to show they can handle ABB in an El Nino year that will probably shrink crops in their Australian draw area.
Is Bunge really the most likely partner as per Reuters? It really is hard to see it that way. Just because Bunge's young Australian branch has some ex-AWB employees, it does not put Bunge to the top of my list. Bunge had investments in pork production which it sold off many years ago, and only returned to grain and oilseed trading when the boards' monopolies were removed. In fact there was no open interest shown for ABB when Viterra put in its bid that the farmer shareholders initially were not happy with.
Initial speculation started last week around talks that ABW was looking to sell its Geneva operations and that Noble Group with a recent infusion of cash from CIC, Cargill or Louis Dreyfus could be interested. Australian grain trading remains heavily regulated, with grain terminals having to basically agree to open their handling facilities to everyone. Also, the Boards built up a large network of inefficient storage facilities to accept all the farmers' grains at harvest time. This is very different from the picture in the US and even in Canada where competition and large inland terminals, rapid loading and unloading of trains and on-farm storage have reduced handling costs and garnered higher returns for the grain companies and the farmers.
I think that there will be interested in AWB, either as a joint venture, strategic alliance or even an acquisition. I would not put Bunge or Noble Group (large mining assets in Australia) at the top of the list and definately would not include Glencore or Gavilon (group that acquired ConAgra's trading). If there were to be serious interest it would come from Cargill and ADM. I would expect that Cargill would be the potentially most interested given their long term investment in the sector and some serious change in their pockets from recent sale of meat assets in Brazil and feed mills in Spain and Portugal to Nutreco.
Gary Drimmer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
