September 28, 2009 / 9:55 AM / 8 years ago

Bunge seen most likely partner for Australia's AWB

SYDNEY (Reuters) - U.S. agribusiness giant Bunge Ltd (BG.N) heads a list of potential joint venture partners for Australia’s AWB Ltd AWB.AX, because of ties fostered by some Australian staff once employed by AWB, industry sources said.

With a grain market share of just 23 percent, AWB is greatly eroded from the days when it held a monopoly of Australia’s bulk wheat exports, before deregulation cleared the way last year for rival domestic and international firms to enter the wheat trade.

Last Wednesday, describing itself as a niche player in the international marketplace, AWB announced it was in preliminary talks with a global grain group to strengthen its position but declined to say who it was talking to.

Industry sources pointed to Bunge, however, where several ex-AWB employees had headed after Australia freed up the wheat export industry.

“Bunge have a number of ex-AWB employees who would be very close to AWB,” a senior grain trader, who asked not to be identified, said on Monday.

“Bunge don’t have a built-up team for grain acquisition at the grower level while AWB does, so this may be an attractive buy for them to fill the missing link.”

The U.S. firm’s Australian management was not available to comment.

Last week AWB also it was holding discussions with the same firm about selling its profitable Geneva grain trading business, sparking a wave of speculation about the buyer’s identity.

“From what I’ve heard a whole bunch of people have been running their slide rule over them,” said Mike Chaseling, deputy chairman of Emerald Group, an Australian firm that holds one of the 23 Australian wheat export licenses issued to date.

Chaseling said he wouldn’t be surprised if another large North American firm was looking for expansion Down Under.

He said this month’s $1.4 billion takeover of South Australian-based bulk handler and export ABB Grains Ltd by leading Canadian grain firm Viterra VIT.TO, showed there was strong interest in Australia, the world’s No. 4 grain exporter.

Since the wheat trade was freed up, shipping records show AWB has teamed with Bunge in Australia, to combine shipments to export customers, as it struggled to recover from the loss of its monopoly.

“If it goes to plan the logic is AWB will gain access to a bigger balance sheet and will have a global reach -- it is all about scale,” said analyst James Ferrier at investment firm Wilson HTM.

The only reason the firm revealed the talks was because of disclosure obligations as it raised A$220 million ($190.8 million) to pay off debt, Ferrier said.

Earlier this year, Credit Suisse valued the Australian grain trading business at about A$450 million and the Geneva operation at about A$150 million.

    Any deal is likely to see AWB build on its strength as a grain accumulator in Australia where its rural stores network keeps it in touch with more than 30,000 grain growers.

    Other firms that have expressed interest in building a greater presence in Australia include U.S. group Archer Daniels Midland Co (ADM) (ADM.N), the only North American major grain group not to have a direct presence in Australia.

    Indirectly, however, it has a presence through its ownership of Germany’s Alfred C Toepfer International.

    Toepfer operates a grain accumulation and trading business in Australia with rural services group Elders Ltd (ELD.AX) in which Elders accumulates the grain and Toepfer does the trading.

    Another potential joint venture partner is Singapore-based commodities trading Noble Group (NOBG.SI), now cashed up after China’s sovereign wealth fund China Investment Corp last Tuesday paid $850 million for a 14.5 percent stake.

    Noble last week said it would use much of the CIC investment proceeds to boost its exposure to agribusiness globally.

    The speculation extends to firms such as Cargill Inc CARG.UG, Glencore International and Louis Dreyfus, which are all notoriously tight-lipped about their dealings.

    Another firm on the radar screen is Omaha-based Gavilon LLC, which has been expanding in the United States and elsewhere. Gavilon was formed last year to acquire the commodity trading and merchandising operations of ConAgra Foods Inc (CAG.N).

    ($1=1.153 Australian Dollar)

    Editing by Clarence Fernandez

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