SunRice urges farmer shareholders to back ASX listing

Australian rice growers are set for at least a $200 million windfall as processor and marketer SunRice pushes for a long-awaited listing on the Australian Securities Exchange.

The proposed listing and $30 million capital raising is key to its global growth plans and comes two years after the company delayed a grower vote on a more complex capital restructure and ASX listing following a farmer backlash at dairy group Murray Goulburn.

SunRice chief executive Rob Gordon said the new proposal was less complex and ensured the company remained in the control of about 700 rice growers, mostly in the Riverina district of NSW, who own A-class shares.

It involves moving rarely traded B-class shares, which carry a market capitalisation of about $225 million on the National Stock Exchange, to the ASX where analysis shows they could double in value.

SunRice, which is forecasting net profit of $45 million this year with revenue of about $1.2 billion, said its dual-class share structure would be preserved to ensure growers held on to control.

The ASX listing would remove restrictions that put a 5 per cent cap on B-class shareholdings and limit ownership to current and former rice growers. The listing would allow anyone to invest up to a maximum 10 per cent shareholding.

The board's ASX proposal requires the support of at least 75 per cent of both A-class and B-class shareholders to progress with a vote expected on September 20.

The B-class shares trade at about five times earnings, which is a fraction of the multiples enjoyed by other ASX-listed agriculture and food stocks. Many trade on price-earnings multiples in the teens, while some like GrainCorp and Bega trade at more than 20 times. The 10 per cent ownership cap and the superior voting rights enjoyed by A-class shares may limit the B-class shares from gaining a loftier multiple.

"Even in an ASX environment, the non-voting B-class shares wouldn't be expected to trade at the upper end of comparable companies, but nevertheless we think a fair amount of value is being left on the table, bearing in mind lack of liquidity currently in the Bs," Mr Gordon said.

It is more than a decade since the former co-operative was corporatised and listed on the NSX, and seven years since growers used their voting power to reject a $610 million takeover offer from Spanish company Ebro.

The takeover divided major shareholders, including brothers Julian and Gerald Menagazzo, and Bell Potter Securities founder Colin Bell. It failed after gaining the support of 76 per cent of B-class shareholders but only 67 per cent support from A-class shareholders.

SunRice chairman Laurie Arthur said growers and shareholders were positioned to "take one of the most significant steps forward in our 70-year history".

If the ASX proposal is successful, the board has flagged a capital raising of up to $30 million as a first step in its growth strategy.

SunRice is looking to capitalise on growing global demand for sushi rice and low GI-rice produced in Australia and to take its rice-based snack foods into new markets.

Mr Gordon foreshadowed further investment in the Vietnamese rice supply chain and SunRice boosting its footprint in the Middle East and North America.

"The big picture here is that we have got a good grower strategy, which we are looking to pursue, and have a good balance sheet, but at some point in the future we will need to tap external equity markets," he said.

"Just restricting access to equity to effectively 700 growers in the Riverina and their balance sheets is inadequate for a company of our scale with the growth aspirations we have."

SunRice is being advised by Macquarie and lawyers King Wood Mallesons and also Addisons.

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