Rains marketers GrainCorp and AWB will merge to create a $2 billion diversified agribusiness that will be one of Australia’s biggest.

The two companies today said GrainCorp will issue to AWB shareholders 1 GrainCorp share for every 5.75 AWB shares they own, subject to an AWB shareholder-vote.

The transaction will result in a nil premium merger, with the exchange ratio based on the volume weighted average prices of shares in each company over the last six months.

GrainCorp’s shareholders will hold 58 per cent and AWB shareholders 42 per cent of the merged company.

The combined entity will have a market capitalisation of more than $2 billion.

The merger is expected to add to earnings per share for both GrainCorp and AWB shareholders, with synergies in excess of $40 million per annum.

The two companies said the merged entity will be more attractive to investors, with greater stock liquidity, improved access to capital and significant efficiencies.

The boards of both GrainCorp and AWB unanimously support the proposal.

AWB today also downgraded earnings guidance for the financial year ending September 30, now estimating that profit before tax and items will settle to between $75 million and $95m, compared with previous guidance for $85m to $110m.

(Source: TheAustralian.com.au)