Australia's AWB, ABB Grain talk merger

29 November 2008

Australian wheat exporter AWB Ltd, the former monopoly in the field, is reported to be in merger talks with ABB Grain Ltd.

If successful, the transaction would create Australia's largest grain shipper at a time when industry deregulation is attracting global traders.

AWB said in a statement that there is no assurance of the talks ending in an agreement. The Adelaide-based ABB Grain, which is Australia's largest exporter of barley, too confirmed that talks were on. Shares of both companies surged to a combined market value of A$2.5 billion ($1.6 billion).

AWB shares were up around 6.9 per cent at A$3.41 on the Australian stock exchange, while ABB Grain gained a record 16 per cent to A$7.56.
In July, the Australian government had decided to allow multiple wheat shippers, including foreign traders such as Marubeni Corp.

This move has pressured Australian exporters to explore merger options, as agricultural companies globally are looking at acquisitions, being optimistic about the fact that the global financial crisis would not impact surging food demand.

Australia is the world's sixth-largest wheat exporter. It drew up new grain export laws after AWB lost its monopoly over paying kickbacks to Iraq to win sales.