<article>Australian takeover target <a href="http://dealstreetasia.com/tag/GrainCorp">GrainCorp </a><a href="http://dealstreetasia.com/tag/GrainCorp">Ltd</a> said on Thursday it plans to separate in two, spinning off and listing its global malting business which contributed over half the company&#8217;s earnings last year.</article>

Australian takeover target <a href="http://dealstreetasia.com/tag/GrainCorp">GrainCorp </a><a href="http://dealstreetasia.com/tag/GrainCorp">Ltd</a> said on Thursday it plans to separate in two, spinning off and listing its global malting business which contributed over half the company&#8217;s earnings last year.
At the same time, GrainCorp said it continues to engage with suitors, including Long-Term Asset Partners (LTAP), a little known asset manager that last year made an unsolicited A$2.38 billion ($1.69 billion) takeover bid for the grains group.
Australia&#8217;s biggest listed bulk grain handler said the new GrainCorp would focus on grains and edible oils production after the demerger, winning annual cost savings of about A$20 million a year.
The spun off company, dubbed <a href="http://dealstreetasia.com/tag/MaltCo">MaltCo</a>, would be the world&#8217;s fourth-largest independent maltster with malting houses in the United States, Canada, Australia and Britain, serving the specialty malt, whisky and craft beer markets.
&#8220;The Board believes that the demerger would unlock significant value for shareholders,&#8221; GrainCorp Chairman, Graham Bradley said in a statement to the exchange.
Shares in GrainCorp rose 6.3 percent to A$9.80 following the announcement, while the broader market was slightly lower.
That was still below the A$10.42 per share proposed by LTAP last year, which came amid a drought that has wilted crops across Australia&#8217;s east coast, limiting the firm&#8217;s ability to earn revenue from international grain trading.
A spokesman for LTAP said it was still conducting due diligence on its target but declined to comment on the demerger announcement.
GrainCorp said it continued to engage with parties who had expressed interest in part or parts of its business, including LTAP, but it had not received a &#8220;definitive&#8221; update from the group.
&#8220;There remains potential for GrainCorp, MaltCo or other portfolio businesses to be sold,&#8221; the company said.
Last month it sold its bulk liquid terminals business for A$350 million.
GrainCorp is also considering buying derivative instruments from an insurer to reduce cash flow volatility related to grain harvest volumes, the company said.
If the separation goes through, shareholders will receive new MaltCo shares in proportion to their shareholdings in GrainCorp, while also retaining their GrainCorp shares.
&#8220;A demerger would provide both MaltCo and New GrainCorp with increased flexibility to implement independent operating strategies and capital structures and allow them to attract investors with different investment priorities,&#8221; said GrainCorp Chief Executive Officer Mark Palmquist.
Palmquist will become CEO of MaltCo, and resign from his role at GrainCorp after the demerger is complete.
Last financial year, the MaltCo businesses produced A$170 million in earnings before interest, tax, depreciation and amortisation (EBITDA). That compared with EBITDA of A$101 million produced by the new GrainCorp business.
Also Read:
<a href="https://www.dealstreetasia.com/stories/graincorp-long-term-asset-partners-112311/">Australia’s GrainCorp receives $1.8b takeover offer from Long-Term Asset Partners</a>
Reuters

The new GrainCorp would focus on grains and edible oils production after the demerger, winning annual cost savings of about A$20 million a year.

Australia's GrainCorp to spin off, list global malting arm

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