SYDNEY - Grains marketers GrainCorp and AWB have said that the two companies will merge to create one of Australia's largest diversified agribusinesses.
The two companies say GrainCorp will issue to AWB shareholders one GrainCorp share for every 5.75 AWB shares they own, subject to an AWB shareholder vote.
The transaction will result in a nil premium merger with the exchange ratio based on the volume-weighted average prices of shares in each company over the past six months.
GrainCorp's shareholders will hold 58 per cent and AWB shareholders 42 per cent of the merged company.
The combined entity will have a market capitalisation of more than A$2 billion ($2.49 billion).
The merger is expected to add to earnings per share for both GrainCorp and AWB shareholders, with synergies of more than A$40 million a year.
The two companies say the merged entity will be more attractive to investors, with greater stock liquidity, improved access to capital and significant efficiencies.
Australia two years ago ended a monopoly system for wheat exports formerly held by AWB, spurring entry into the market of international rivals including Cargill and Louis Dreyfus.
Belinda Moore, a Brisbane analyst with Royal Bank of Scotland Group, said: "It is a highly competitive market now that the big internationals have entered the space and a combined group would be a more competitive force."
- AAP, Bloomberg
Giant grain marketers in A$2b merger
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