Private equity firms target United Malt after $165m raising

Picture: Emma Brasier

The GrainCorp spin-off United Malt Group is said to be once again catching the eye of private equity suitors, according to sources, with the group in a robust position after a $165m equity raising in May.

The stock is currently off its 2020 highs of around $5, with shares closing on Tuesday at $4.15, taking its market value to about $1.22bn.

Sources in the market say that they believe parties are eyeing the stock, but the big question as to whether one comes forward with a proposal will rest on securing funding in the current COVID-19 environment, say some, with financing challenges and economic uncertainty said to be putting the brakes on some merger and acquisition activity.

Any buyer would likely need to tap the US debt markets, which are at least currently open for business.

United Malt was demerged from GrainCorp in March with net debt of $483m and before that time, it was always said to have been in the cross hairs of private equity, with Partners Group understood to be among the parties looking.

Before the demerger, it is thought that the GrainCorp board would have wanted about $2bn for the business.

However, weighing on the share price has been the fact that malt consumption has declined due to less beer being sold when COVID-19 trading restrictions were in place.

The raising at $3.80 per share in May has left the group well capitalised. UMG is among the four largest malt businesses in the world, with the others being Cargill, Malteurop and France’s Boortmalt, backed by Temasek out of Singapore.

For the year to September, it generated $70.4m in net profit.

The malt producer is being looked at as another operation in the agriculture space, cotton producer Auscott, is also up for sale through PwC.

One theory is that the business could be rolled up with Namoi Cotton, but others say that it is likely to have appeal for a group such as Olam International, as well as North American pension and endowment funds.

The business is owned by Californian-based family company JG Boswell.