AWB Limited

AWB Limited was an Australian grain-marketing organisation and diversified agribusiness group. Its origins lay in the Australian Wheat Board, established by the Australian government in 1939 to regulate wheat marketing during the economic and agricultural disruption associated with the Great Depression. For much of its early existence, the organisation was government owned and operated. Its central function was the administration of Australia's wheat single desk, under which one authorised exporter marketed Australian wheat internationally. The organisation was privatised in July 1999. Ownership was initially structured to give eligible wheat growers special rights through a class A share, including the ability to elect most of the board and the chairperson. Class B shares began trading publicly on the Australian Securities Exchange in August 2001. Constitutional changes approved in 2008 removed the special grower-share structure and consolidated ownership into a single class of shares. Management argued that the change would simplify the company and reduce risk, while grower organisations and other industry groups criticised the erosion of producer influence. After privatisation, AWB expanded beyond wheat export marketing. Its businesses included domestic grain trading, bulk grain collection and transport through GrainFlow, international shipping and commodity-management activities, financial services, credit and risk management, and rural services through Landmark. Landmark supplied Australian farmers with products and services including finance, insurance, real estate, agricultural equipment and commodities trading. This diversification was intended to reduce dependence on the wheat export monopoly and create additional sources of income. AWB became internationally notorious in the mid-2000s because of allegations that it had paid approximately A$290 million in improper transportation fees to the Jordanian company Alia, with much of the money ultimately passing to Saddam Hussein's Iraqi government. The payments occurred during the United Nations Oil-for-Food Programme and were found by Australia's Cole Inquiry to have been knowingly arranged from 1999 in order to preserve AWB's Iraqi wheat business. The affair led to intense criticism of AWB, the Australian government and the single-desk system. Managing director Andrew Lindberg resigned in February 2006, and the inquiry recommended that several individuals be investigated for possible criminal and corporate offences. The scandal produced regulatory, legal and commercial consequences. The Australian Federal Police ended its criminal investigation in 2009, while the Australian Securities and Investments Commission pursued civil proceedings against former directors and officers. Several executives received fines and bans from managing companies, and a shareholder class action was settled for A$39.5 million in 2010. AWB also faced allegations involving United States sanctions on Iran, weaker results from international expansion including Brazil, and losses associated with restructuring and financial-services activities. In its final years, AWB attempted to simplify and de-risk its business. It sold its financial-services loan book to ANZ Bank in December 2009 and announced plans concerning its Geneva business and local grain-trading operations in 2010. AWB agreed to merge with GrainCorp in July 2010, but that transaction did not proceed after Agrium made a successful takeover offer. Agrium completed the acquisition in December 2010, after which AWB was delisted. In 2011, Cargill acquired AWB's Commodity Management business from Agrium. The AWB corporate entity and brand are therefore historical rather than active independent businesses.

AWB was created in 1939 as the Australian Wheat Board, a government response to severe instability in the wheat market. Its institutional model centred on a single desk for wheat exports, giving one authorised organisation responsibility for marketing Australian wheat overseas. The arrangement was intended to provide orderly access to markets and reduce the effects of volatile prices and fragmented selling. For decades the wheat board remained a government-run body. A major structural change came in July 1999, when it was converted into a private company owned by wheat growers. The privatisation introduced class A shares for qualifying growers and class B shares for public investors. The latter began trading on the Australian Securities Exchange in August 2001. Growers initially retained significant constitutional influence, including the power to elect most directors and the chairperson. Following privatisation, AWB broadened its activities. AWB International continued the legislatively authorised wheat export role, while AWB Australia handled domestic wheat trading and exports of non-wheat grains. GrainFlow developed bulk grain-handling and transport infrastructure linking farms with ports. Landmark provided rural services, including finance, insurance, property services, agricultural equipment and commodities trading. Other subsidiaries supported information technology, asset management, export finance and risk management. In 2008, AWB changed its constitution to replace the two-class ownership structure with one type of share. Management presented the reform as a way to simplify governance and reduce business risk. Grower groups and other industry organisations opposed the change because it reduced special producer control. The company's most serious crisis was already emerging: allegations that AWB had paid Iraqi government-linked kickbacks during the United Nations Oil-for-Food Programme. The payments were presented as transportation charges to Alia, a Jordanian transport company. According to the Cole Inquiry, AWB knowingly entered the arrangement from the middle of 1999 to maintain its Iraqi wheat business, and approximately A$290 million was ultimately transferred onward to the Iraqi regime. The findings caused international condemnation, legal action and renewed debate about whether a company implicated in the scandal should retain its wheat export monopoly. Lindberg resigned in 2006, and Gordon Davis was brought in from Orica to lead a new management team. After the inquiry, AWB attempted to rebuild its governance and simplify its operations, but it continued to face weak performance and controversy. Allegations concerning an attempted payment involving Iran raised further sanctions-compliance concerns. Expansion into Brazil produced significant losses and contributed to a balance-sheet recapitalisation in 2009. The company also sold its financial-services loan book to ANZ Bank and pursued other disposals as part of a strategy to reduce complexity and financial exposure. AWB's final period involved declining confidence in its standalone prospects and a search for a strategic buyer. It announced a proposed merger with GrainCorp in July 2010, but Agrium subsequently made a successful takeover offer. The acquisition was completed in December 2010 and AWB was delisted. Cargill later purchased the AWB Commodity Management business from Agrium in 2011. AWB Limited consequently ceased to exist as an independent listed agribusiness, while parts of its operating portfolio passed to new owners.

• 2011

  Commodity Management business sold to Cargill

  [1]AWB Limiteden.wikipedia.org

  Cargill acquired the AWB Commodity Management business from Agrium.

• 2010

  Acquired by Agrium

  [1]AWB Limiteden.wikipedia.org

  Agrium completed its takeover of AWB, which was subsequently delisted from the Australian Securities Exchange.

• 2009

  Financial-services loan book sold

  [1]AWB Limiteden.wikipedia.org

  AWB transferred its financial-services loan book to ANZ Bank as part of a simplification and risk-reduction strategy.

• 2008

  Ownership structure consolidated

  [1]AWB Limiteden.wikipedia.org

  Constitutional amendments replaced the special class A and public class B arrangement with a single share class.

• 2006

  Cole Inquiry report released

  [1]AWB Limiteden.wikipedia.org

  The inquiry found that AWB had knowingly participated in arrangements involving kickbacks to Iraq.

• 2001

  Public share trading begins

  [1]AWB Limiteden.wikipedia.org

  AWB's class B shares began trading on the Australian Securities Exchange.

• 1999

  Privatisation

  [1]AWB Limiteden.wikipedia.org

  The Australian Wheat Board was restructured as a private company owned by wheat growers.

• 1939

  Australian Wheat Board established

  [1]AWB Limiteden.wikipedia.org

  The Australian government established the organisation to regulate wheat marketing and introduced the foundations of the wheat single desk.

A producer-linked Australian grain-marketing organisation that evolved into a diversified agribusiness and rural-services group, with its historical identity strongly associated with the wheat single desk.

• Grain marketing · 1939

  Wheat single-desk export marketing

  AWB's defining historical service was the centralised marketing and export of Australian wheat. The single desk consolidated export arrangements, customer contracting and market access through an authorised organisation. It was created under the government wheat-board system and remained central to AWB's identity after privatisation, until the organisation's eventual acquisition and dissolution as an independent company.

• Grain logistics

  GrainFlow

  GrainFlow was an AWB subsidiary focused on bulk grain handling and transport. Its infrastructure and logistics activities connected grain supplied by farmers with port facilities and export channels, supporting the physical movement of wheat and other grains through the Australian supply chain.

• Rural services

  Landmark

  Landmark was AWB's rural-services business. It served Australian farmers through activities including finance, insurance, rural real estate, commodities trading and farm-equipment sales. The business broadened AWB's customer relationships beyond wheat marketing and exposed the group to agricultural sectors such as wool and livestock.

• Commodity management

  AWB Commodity Management

  AWB Commodity Management handled grain and related commodity-trading activities outside the traditional government wheat-board role. The business was acquired by Cargill from Agrium in 2011 after AWB had ceased operating as an independent listed company.

• 2007

  Alleged breach of US sanctions involving Iran

  Reports alleged that AWB's US subsidiary attempted to pay an Iranian transport company approximately US$1 million in circumstances that could breach United States sanctions. The allegation added to scrutiny of AWB's compliance systems after the Iraq scandal.

  Source

• 2005

  Oil-for-Food kickback scandal

  AWB was accused of paying approximately A$290 million in transportation fees through Alia, with the money ultimately benefiting Saddam Hussein's Iraqi government during the United Nations Oil-for-Food Programme. Australia's Cole Inquiry later found that AWB knowingly entered the arrangement to retain Iraqi business. The affair led to executive resignations, investigations, civil proceedings, regulatory criticism and renewed opposition to the wheat single desk.

  Source

Read more

• 2010

  Proposed merger with GrainCorpM&A

  Background

  AWB sought a strategic transaction after continuing operational and financial difficulties.

  Action taken

  AWB entered an agreement to merge with GrainCorp, but the transaction did not proceed after Agrium made a successful takeover offer.

  Aftermath

  Agrium acquired AWB in December 2010, and AWB was delisted.

  Source

• 2009

  Simplify and de-risk the businessStrategy

  Background

  Expansion into trading and financial services increased complexity and contributed to losses, including difficulties associated with the Brazil expansion.

  Action taken

  AWB pursued disposals and restructuring, including the sale of its financial-services loan book to ANZ Bank.

  Aftermath

  The company continued to report weak performance and restructuring costs while seeking a longer-term strategic solution.

  Source

• 2008

  Consolidate the share structureStrategy

  Background

  AWB's two-class structure gave qualifying growers special governance rights, but management argued that it complicated the company and increased risk.

  Action taken

  The constitution was amended to create a single class of shares and remove the special grower-share arrangement.

  Aftermath

  Grower organisations and industry groups criticised the loss of special producer influence, while management presented the reform as a simpler and lower-risk model.

  Source

1. 1AWB Limiteden.wikipedia.org