Although AWB and ABB Grain have called off merger discussions, farming groups are not so sure it is the end of the issue.
Industry speculation is that there was a failure to agree on the valuation split of the companies, with ABB currently having a marginally larger market capitalisation than its historically larger suitor in AWB.
Although the merger is off the cards for now, speculation is that is only the first cut and thrust in more protracted negotiations.
It’s certainly the opinion of South Australian Mallee farmer Ian Farley.
“The merger talks are not off, they’re just delayed,” he told FarmOnline.
“Previously, the merger between ABB and Ausbulk was on and off about four times - I think maybe what we are seeing is a bit of a smokescreen.”
Analysts took the news poorly - suggesting that a merger made strategic sense, along with delivering significant synergies.
So both companies have seen their share prices suffer.
AWB shares have fared the worst - plummeting nearly 16pc since the news, down from $2.85 to $2.43 at the ASX close on Friday.
ABB has fallen about half that, being down nearly 8pc from $7.50 before to the news that the merger was off, to $6.92 at the ASX close on Friday .
A merged company was likely to have shed significant staff numbers and been based in Adelaide, ABB’s home.
But some within the industry are not sure that consolidation within the grains industry needs to be done in the near term.
One source, who declined to be named, suggested that a deregulated grains industry was too immature to warrant immediate mergers.
More time is required to analyse the nature of the new industry.
“There has been insufficient time since the removal of the SA barley and national wheat pools and the removal of grower control in ABB, AWB and GrainCorp to decide what happens, he says.
“It will take a few years to work out who has what market share and the related profitability.
“It will also take time to see what the grain selling patterns are and see how it all plays out, before making a decision on possible mergers.”
Another group happy to see the merger not get up is the South Australian farming community.
Many were concerned that a merger between the two companies would result in a ‘closed circuit’ in the South Australian grains industry.
A merged entity would have controlled the storage system and ports and been the dominant player on the marketing front.
There would have been insufficient competition in the supply chain - with the four South Australian AWB GrainFlow sites providing one of the few alternatives to the ABB storage system.
State farmer organisations in other states, however, are not universally opposed to merger plans.
Some say a merged company would provide the strong presence the industry needs.
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