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GrainCorp-led group to buy Goodman's Integro for A$170M

Goodman Fielder to sell Integro unit for A$170M to GrainCorp consortium

By Paul McBeth

Aug. 28 (BusinessDesk) - Goodman Fielder, the unprofitable food ingredients maker, will sell its Integro unit to a consortium made up of GrainCorp and Gardner Smith for A$170 million and will use the proceeds to pay down its debt.

The sale doesn't include the out-of-home business in Australia or Goodman's Asia Pacific fats and oils business, and is expected to be completed in October, the Sydney-based company said in a statement. Goodman expects to book a A$25 million pretax profit on the sale. As part of the transaction, Goodman will enter into a long-term supply partnership with GrainCorp for oil and finished goods.

"This divestment enables us to concentrate our investment and internal resources on our core categories and brands," chief executive Chris Delaney said. "The proceeds of the sale also ensure Goodman Fielder's financial position is strengthened further as part of our continuing focus on prudent capital management."

The food ingredients maker put Integro and its New Zealand milling units on the block, after successive writedowns in the value of its business, in a bid to cut its level of debt and bolster its balance sheet. The competitive retail environment and rising cost of raw materials has put its operation under strain and led to a rationalising of its businesses.

Goodman's Integro commercial oils business recorded a 1.9 percent gain in sales to A$339.9 million while normalised ebitda fell 24 percent to A$30.6 million in the year ended June 30. The margin in that business fell to 9 percent from 12.1 percent.

The dual-listed shares were unchanged at 68 cents on the NZX, and gained 1.9 percent to 53.5 Australian cents on the ASX yesterday. The stock is rated an average 'hold' based on 12 analyst recommendations compiled by Reuters, with a median target price of 58.8 Australian cents.

The deal is part of a bigger acquisition by GrainCorp, which is also the Gardner Smith Group, Australia's second-biggest oilseed crusher, worth A$472 million. The acquisitions will be funded by issuing scrip to Gardner Smith shareholders, a A$159 million pro-rata renounceable entitlement offer, and debt.

"It is the combination of the two into a cohesive whole that allows us to unlock additional value for GrainCorp's shareholders, connects the grain growers who use our network more closely with edible oils customers, and creates a seamless and compelling offer for those customers," chief executive Alison Watkins said.

GrainCorp's shares rose 0.2 percent to A$9.85 on the ASX yesterday.


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