Australia: GrainCorp chairman leaves to head up board of newly spun-off malt business

GrainCorp chairman Graham Bradley has defended his decision to leave to head up the board of its newly spun-off malt offshoot under demerger plans that farmers fear could weaken the company's vast storage and handling network, which they rely on in eastern Australia, The Australian Financial Review reported on June 24.

The Bradley move comes after former chairman Don Taylor said he was worried about the future for GrainCorp's core business once the growing and profitable malting arm is spun out.

It also follows Mr Bradley's strong criticism of an ultimately unsuccessful A$3.3 billion takeover bid from Long Term Asset Partners for the whole of GrainCorp, which included the former Business Council of Australia president saying GrainCorp's "social purpose" was a material consideration.

GrainCorp chief executive Mark Palmquist has already announced his intention to join a new ASX-listed malt company headquartered in North America.

Klaus Pamminger had been named as Mr Palmquist's successor but GrainCorp revealed on June 24 he would stay in the role of chief operating officer after getting cold feet about the top job.

GrainCorp said it was beginning an international search for a new chief executive, but hasn't ruled out promoting another of its executives.

Mr Bradley said the decision to leave to become chairman of MaltCo was taken in consultation with the rest of the board and based on the needs of the two companies post demerger.

"I've had experience chairing ASX listed companies that are headquartered overseas," he said.

"MaltCo will be the larger of the two companies but will have more managers who are less familiar with reporting directly to a publicly listed company board."

Mr Bradley hosed down renewed speculation the malt division might be sold prior to the demerger.

It is understood GrainCorp was in negotiations with potential buyers in April when it announced the demerger plan and that they are being asked to take a last look at a malt business valued at about A$2 billion based on recent deals in the sector.

Mr Bradley said it would take most of the rest of this year for GrainCorp to get its ducks lined up for a shareholder vote on the demerger and he doubted the malt business would be sold in the meantime.

"It is possible somebody might come along with a knockout offer but one of the challenges is that it will be more advantageous to our shareholders to contemplate a sale of the company post demerger for tax reasons than it will be beforehand, but you can never say never," he said.

Mr Bradley said he hoped there wasn't a negative perception of what would be left of GrainCorp after the demerger fuelled by his exit along with that of Mr Palmquist and Mr Pamminger's decision to reject the chief executive role.

"It is largely for personal reasons that Klaus [Pamminger] has decided he doesn't want to take the role of a public company CEO. We respect that decision," he said.

"Mark Palmquist is American and has been with the company for five years and made a strong contribution and will continue to do so until the demerger is in place."

It is understood Mr Pamminger has recently moved his family back to a farm near Albury and would prefer to focus on his operations role.

LTAP, which officially withdrew its takeover offer on May 6 after it had been stalled in the due diligence stage for almost five months, intended to install former GrainCorp executive Nigel Hart as its chief executive.

Former CBH chief executive Andy Crane, who ran the giant West Australian-based grain co-operative for eight years and saw off a GrainCorp-backed takeover bid in that time, could emerge as another contender.

Earlier this month, GrainCorp announced a 10-year insurance deal with Aon designed to smooth its cash flow and earnings through seasonal ups and down in farming.

Mr Bradley said the production-based insurance derivative was a major breakthrough and central to the future of the core grains business post demerger.

He also took a parting shot at LTAP, saying its complex takeover proposal had been time-consuming and distracting for GrainCorp.

The GrainCorp share price closed down about 2 per cent at A$8 on June 24.

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