Investors in United Malt Group (UMG) are demanding a payout of AUD 5 per share, prompting the company’s board to review its options. The move follows UMG’s disappointing financial performance in the wake of the Covid-19 pandemic, which saw earnings slide by 27% in the 2020 financial year. The board has announced that it is now considering a “process” in response to the shareholder’s demands, sparking speculation about the future of the Australian malt maker. In this article, we take a closer look at the situation and explore what the board’s next move might be.
The talks between UMG and a European rival have reportedly ended in a bid, resulting in UMG’s stock trading halt on Monday. The offer will be confirmed by UMG’s board on Tuesday, and significant due diligence is said to have been conducted. The announcement will provide an opportunity for other potential buyers to step forward, but private equity may be deterred by the presence of a strategic player. Key UMG shareholders, including Tanarra Capital, which represents a 10.8% stake, are expected to have a significant influence in the process. Tanarra previously urged GrainCorp to spin-off UMG in 2020, but has since repurchased shares and is seeking ways to maximize value. Tanarra’s recent successful bid for Healius suggests a commitment to applying private-equity thinking to public companies. If the acquisition of UMG is completed, it is expected to be a friendly deal with GrainCorp retaining an 8.5% stake in the business.
As investors of United Malt Group await the board’s decision about their request for a $5 payout, the company faces a crucial moment in its history. The board’s decision will undoubtedly have significant implications for both stakeholders and the future of the business. While the outcome remains uncertain, the company’s commitment to engaging in a transparent and fair process is reassuring. Regardless of the board’s final decision, United Malt Group’s success will ultimately depend on its ability to balance the needs of its investors and keep their trust while also continuing to innovate and grow as a global leader in the malt industry.
