Cargill sues Viterra over allegedly dodgy malt
Could it be that Cargill is cutting off its nose to spite its face? The Age newspaper reported on 8 October 2014 that Cargill, the owner of Australian maltster Joe White, is suing Joe White’s former owner Viterra because Joe White allegedly supplied brewers with sub-standard products. These allegations were made in a Victorian Supreme Court lawsuit filed by Cargill against Canada’s Viterra, a subsidiary of Swiss resources group and commodities trader Glencore.
Cargill bought Joe White last year for AUD 420 million (USD 373 million) but claims it has been forced to slash production by 60,000 tonnes in the first six months it controlled the company, after discovering Viterra covered up the supply of substandard malt by altering chemical analysis certificates.
Cargill said in its suit that Joe White could now produce only 60 percent of its contracted output, which is believed to be about 500,000 tonnes a year, to the specifications set by customers, and would need to spend AUD 30 million to upgrade its plants.
The company said that Joe White’s previous financial performance was “substantially underpinned” by Viterra’s deceptive practices.
“We’re still determining the full damages and will provide further particulars prior to trial,” Cargill spokesman Peter McBride said.
Viterra disputes Cargill’s allegations.
Joe White supplies big Australian brewers Lion, SABMiller and Coopers, but about three quarters of its output is exported, mostly to Asia.
According to Australian media, farmers down-under now fear that their country’s reputation as an exporter of high-quality malt and barley may have been damaged if the allegations are true.
As The Age newspaper has the story, Swiss-headquartered Glencore agreed to buy Canada’s Viterra for CAD 6.1 billion (USD 6.2 billion) in March 2012, but the deal did not close until January 2013. Viterra then moved quickly to sell Joe White, instructing bankers Merrill Lynch to send out an information memorandum in early May. Cargill told the court it made an offer to buy the business on 7 June 2013 based on claims in the memo saying that Joe White “utilised technical analysis and strict quality control procedures to ensure that customer specifications were consistently met”.
Cargill allegedly approached Viterra in late October after reports from Joe White executives that the company had supplied customers with malt made from the wrong variety of barley, had used the additive gibberellic acid, which speeds up the malting process, and had supplied chemical analysis certificates to customers that “misstated the results of analytical testing on the malt”.
In response, Viterra allegedly admitted there had been “instances” where the wrong barley had been used but said there was no “fundamental issue” with Joe White.
Insiders say there have been no complaints about Joe White’s malt. Rumour has it that Joe White has a steeping capacity problem and Cargill would have been annoyed to find this out after their purchase. But all observers agree that by dragging Viterra to court Cargill is possibly over-reacting to get some of its money back.
