The Graincorp Ltd (ASX: GNC) share price is currently trading 7.5% lower after the company announced that its shareholders had approved the proposed demerger of United Malt Group Limited from GrainCorp this morning.
This is on a day that has seen a sharp fall in the S&P/ASX 200 Index (ASX: XJO), with the market down by 7% at the time of writing.
Details of today's demerger announcement
This morning, GrainCorp shareholders voted overwhelmingly in favour of the proposed demerger at the company's Demerger Scheme Meeting and General Meeting which was held in Sydney.
This followed a previous announcement on February 6, where GrainCorp had announced that the Federal Court had approved the Demerger Scheme Booklet in regards to the demerger.
Eligible GrainCorp shareholders are now set to receive one ordinary share in United Malt Group Limited (UMG) for each ordinary share held in GrainCorp on the Demerger Scheme Record Date, which is expected to be Wednesday, 25 March 2020.
United Malt Group is currently a wholly-owned subsidiary of GrainCorp and will become a standalone entity listed on the ASX, holding the malt business.
GrainCorp will now seek orders from the Federal Court of Australia at a second court hearing, which is scheduled for 20 March 2020. If approved, GrainCorp noted that it has the intention of lodging the Court's orders with ASIC on 23 March 2020 to fully finalise the demerger process.
If all of that goes to plan, then effective 23 March 2020, UMG shares are expected to commence trading on the ASX the following day on a deferred settlement basis. The transfer of shares to entitled shareholders is expected to occur on Wednesday, 1 April 2020. Meanwhile, UMG shares are expected to commence trading on the ASX on Thursday, 2 April 2020 on a normal settlement basis.
How United Malt and GrainCorp will be positioned after the demerger
After the demerger process is finalised, United Malt will continue to operate as the world's 4th largest independent commercial maltster. It currently has malting houses in Canada, the United States, Australia and the United Kingdom in the craft brewing and Scotch whisky sectors. United Malt is also a craft malt distributor in North America.
United Malt's balance sheet is expected to support a strong, investment grade capital structure, underpinned by a policy of maintaining a ratio of net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of 2 to 2.5 times.
GrainCorp will continue to operate as an integrated Australian agribusiness operating in over 30 countries, providing a range of services that offer grains, oilseeds, pulses, edible oils and feeds.
Commenting on today's announcement, GrainCorp Chairman, Graham Bradley AM, said: "Subject to Court approval, the Demerger has the potential to unlock significant value for shareholders, with GrainCorp and United Malt having strong foundations for success and growth."
