Cargill buys into Agrium’s grain-handling wing

Canadian fertilizer and ag retail giant Agrium has agreed to sell off the bulk of its newly-acquired Australian grain handling and marketing business to the Australian wing of Cargill.

Agrium on Wednesday said it would see net proceeds of about A$870 million (C$866.8 million) from Cargill’s cash deal for the majority of the former Australian Wheat Board’s commodity management business.

Cargill will also pick up about A$240 million (C$239.1 million) of the AWB businesses’ indebtedness, Agrium said.

The deal, expected to close in the first half of 2011 pending regulatory and other approvals, would leave Agrium with just a handful of AWB’s commodity management assets, worth an estimated A$55 million. Agrium said it will “continue to evaluate (their) disposition.”

Agrium, which on Dec. 3 formalized its C$1.24 billion takeover of AWB Ltd., confirmed only on Tuesday that it was in talks with various parties interested in AWB’s commodity management business, while it would keep AWB’s substantial ag retail arm, Landmark Rural Services.

“Milestone”

Agrium CEO Mike Wilson on Wednesday described the merger of AWB’s commodity management business with Cargill, if completed as planned, as a “significant milestone in the evolution of Australia’s grain industry.”

Cargill Australia’s managing director Ralph Selwood said in a separate release its overall goal is “to provide competitive returns through access to global markets and tools to manage price risk.

“We want to preserve existing pool options and enhance future pools with new tools for growers,” he said.

Cargill’s expertise in shipping large volumes of commodities should make Australian grain “more competitive in more markets,” he said. And the company’s global presence and relationships with grain importers and food firms will also boost Australian growers’ international market access, Selwood added.

In the meantime, Agrium’s Wilson added, “Agrium is committed to ensuring the commodity management divisions operate on a ‘business as usual’ basis in the interim.”

Minnesota-based Cargill, which has had an Australian arm since 1967, already runs grain and oilseed merchandising businesses in that country and offers price risk management products for farmers. Since 1999 it’s built three wholly-owned and two joint-venture grain storage facilities in New South Wales.

Cargill has expanded its Australian interests, mostly within the last decade, to include canola, soybean, sunflower and cottonseed crushing and processing; vegetable oil refining; Allied Mills, a joint flour milling venture with GrainCorp; beef processing and exporting and cattle feeding, through Cargill Beef Australia; and a global cotton marketing business, Cargill Cotton.

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