Japanese trading house Sumitomo takes total ownership of Australian bulk handler and grain trader Emerald Grain

JAPANESE commodity conglomerate Sumitomo Corporation has bought the other half of Emerald Grain Pty Ltd it did not already own.

grain

JAPANESE commodity conglomerate Sumitomo Corporation has bought the other half of Emerald Grain Pty Ltd it did not already own.

Sumitomo took a half share in Emerald Grain in March, 2010, but has now taken full ownership for an undisclosed sum.

Emerald Grain was put together in late 2003 by long-time grain industry players Alan Winney, Mike Chaseling and Mick Cattanach and began trading on July 1 the following year.

Each had been involved with Netco at the time.

Mr Winney became chairman from the establishment of Emerald Grain, while Mr Cattanach was managing director until he left in 2012 to pursue other interests.

Mr Chaseling had been a non-executive director and deputy chairman.

All three now walk away from the company with the total sale to Sumitomo.

Mr Winney said the three original partners saw an opportunity more than a decade ago to set up a grain company focused on growers.

"We saw that growers were drifting away from the established companies," Mr Winney said.

"They wanted someone who treated them as a customer."

From a start-up grain business, Emerald Grain now has 12 per cent of the Australian wheat market behind Glencore and Cargill, each with about 20-25 per cent and CBH Group and GrainCorp on 15-20 per cent, depending on the season.

Mr Winney said the five big players collectively held 85 per cent of the market, with the next biggest only held a 3 per cent share.

He said only Cargill and Emerald had networks which stretched across Australia.

Mr Winney said deregulation of the wheat market saw global companies moving into Australia, threatening the viability of smaller companies.

"So we approached Sumitomo in March, 2009, to buy into Emerald," he said.

Sumitomo had already bought a half share of Australian Bulk Alliance when GrainCorp was forced by the Australian Competition and Consumer Commission to divest its share in the logistics group when it took over Queensland bulk handler Grainco.

In March, 2010, a deal was struck between the principals of Emerald Grain and Sumitomo which involved Emerald Grain buying out Sumitomo's share of ABA at market value and changing its name to Emerald Logistics.

Sumitomo then took a half share in Emerald Grain.

Mr Winney, Mr Chaseling and Mr Cattanach established another company, Emerald Agribusiness Group, to hold the other half of Emerald Grain.

While the trio held the majority of shares in Emerald Agribusiness Group, shareholding was opened up to employees.

Mr Winney said the decision to sell Emerald Agribusiness Group's share in Emerald Grain was driven by the need to expand the business.

He said there was a narrow window of opportunity to invest in key assets in the industry such as port terminals, processing plants and trains.

"The (grain trading) companies that haven't got ports are losing market share," he said.

"We (the three original directors) looked at the strategy and knew we didn't individually have the money to take it forward.

"Emerald had one port and 14 storages but it is not enough to grow.

"We thought it was the right time for Sumitomo to take it on."

Discussions began with Sumitomo last year to take full ownership.

That culminated with the decision announced today.

Mr Winney said growers would not see much change with the buyout.

He said storages with joint farmer ownership would remain with the same arrangement.

Chief executive officer John Murray would continue in his role.

Mr Winney said the new ownership gave Emerald Grain access to Sumitomo's big balance sheet to expand.

"As a 100 per cent subsidiary of Sumitomo Corporation, the company will be able to fund future growth and expansion and compete more effectively in an Australian and Asia grain market that is now heavily influenced by global companies," he said.

He said the new arrangement should lead to lower interest rate costs charged to farmers and marketing products which progressively reduced the payment times to growers.

Sumitomo Corporation general manager of grains and oilseeds and an Emerald Group director Hiro Kurosaki said the new ownership structure positioned Emerald for additional grain and food processing opportunities in Australia and internationally, working alongside sister companies within Sumitomo Corporation.

Sumitomo is expected to use the Emerald brand for its global grain business.